he’s an American internet entrepreneur
and venture capitalist he’s the CEO of
the online shoe and clothing store
Zappos
prior to joining Zappos he co-founded
link exchange which he sold to Microsoft
for two hundred and sixty-five million
dollars he’s Tony Hsieh and here are his
top ten rules for success the great
companies had a vision that had a higher
purpose beyond just money or profits or
being number one in a market and kind of
the irony there is that by not making
profits the number one priority of the
company or the higher purpose of the
company it actually enabled these
companies to make generate more profits
in the long term so sometimes when I
speak at entrepreneur conferences I get
asked what’s a good market to get into
where it can make a lot of money and my
response is amiss instead of thinking
about where you can make a lot of money
think about what are you so passionate
about doing that you’d be happy doing it
for ten years and even if you never made
a dime and that’s what you should be
doing and kind of the ironic thing is
the money will actually follow so you
know we’ve all heard of Craigslist he
didn’t set out to make money he was
passionate about the community and now
it’s one of the top traffic websites on
the internet so I like to say chase the
vision not the money there was a movie
that came out a I think a couple years
ago I called notorious I think it only
lasted a week in the movie theater but
but I saw it and I in it
biggie smalls also known as notorious
b.i.g is well Puff Daddy says to biggie
smalls don’t chase the paper chase the
dream I just want an excuse to put this
picture up here anyways so if you’re an
entrepreneur say think about what would
you be so passionate about doing that
you’d be happy doing it for 10 years
even if you never made a dime from it
and if you have employees now what’s the
larger vision and greater purpose in
their work beyond just money or profits
or being number one
in a market company culture was always
important and myself and Fred and I
interviewed everyone when we were still
in San Francisco basically until we can
do that anymore because there were too
many employees to interview but but
basically we wanted to we had we had
this criteria of you know
yes interview for the normal business
technical stuff but they meet the bar
right technically so do the normal set
of interviews but then you kind of had
this final test of like is this someone
I was choose to hang out with or grab a
drink with and if the answer was if we
weren’t in business together if the
answer was no then we would an entire
them so that goes against a lot of the
things that you know I’ve heard out
there in the past it’s like keep your
work and personal relationship separate
you know like that’s kind of been like a
thing that’s been stated out there like
there should be just firewall between
the two but you went and said okay it’s
very important that I can actually get
along with this person this is a someone
I could go out have a beer with why was
that so important to you
um I guess I have two answers to that
one is yes there are companies that
focus on work/life separation or
work-life balance and at Zappos we
really focus on work-life integration
and you know at the end of the day it’s
just life so you might as and especially
if you spend so much time at work like
you better hopefully enjoy the time that
you’re spending there and the people
that you’re with so that’s one answer
and then the other answer is and I don’t
think the book existed at the time of
Zappos was founded but Jim Collins his
book good to great researched and looked
at what separated the great companies in
terms of long term financial performance
from just the good ones or mediocre ones
and found that the great ones had two
important ingredients that separated
them from just the good ones are
mediocre ones and one of them was that
they all had strong cultures and
and you know we formalize the definition
of our culture into we have ten core
values at Zappos and one of the actually
really interesting things I found from
the research was that it actually
doesn’t matter what your values are what
matters is that you have them in that
you line the organization around them
and the power actually comes from the
alignment not from the actual value so
there’s no judgment of values and so
we’re not out there telling people oh
you should adopt the Zappos values and
culture and so on because actually that
would probably not work in most cases
and where our message is more you should
figure out where your values are and
then align the entire organization
rhythm so our whole philosophy is let’s
take most of the money that we would
have spent on paid advertising or paid
marketing and rather than by our
exposure instead let’s invest it into
customer service in the customer
experience and let our customers do the
marketing for us through word-of-mouth
on any given day about 75% of our orders
are from repeat customers and we
basically grew from no sales in 1999 to
in 2008 was the first year where we hit
a billion dollars in gross merchandise
sales and actually even despite the bad
economy we’ve actually continued to grow
over the last two years in fact our net
sales were q1 this year we’re up almost
50% year-over-year and people asked us
what do we do differently over the last
24 months and it’s actually we actually
didn’t do anything differently and it’s
not because of anything we did over the
past two years it’s because of all the
investment we made prior to that that we
continue to grow because of the loyalty
of our customers and the number one
driver of all that growth is through
repeat customers and word-of-mouth I
would say probably the biggest thing is
it’s just patience and and I don’t mean
patience as as in in terms of just you
know sitting around and hoping something
miraculous will happen but really when
you’re making decisions for your
business thinking long term and think
about what is actually going to make a
difference 10 years from now and what’s
actually going to make a difference even
two or three years from now but I think
most people get stuck in what’s going to
make a difference
this week or this quarter or even this
year and and you know when you think
longer-term the decisions you make end
up being very different and so things
like culture for example if your culture
you know suddenly goes downhill tomorrow
or assembly improves tomorrow you’re not
going to see the effects in this quarter
or this year or even in terms of your
bottom line but two or three years down
the road you will and same thing with
customer service if if we hypothetically
stopped answering our phones and fired
everyone in our call center that would
actually have a huge gain in our profits
for 2009 I don’t think it would hurt our
top-line revenue we’d still do over a
billion and growth sales but two or
three years from now then we’d start
feeling the effects so I think the
biggest thing is just how how long-term
are you thinking I always like doing
these thought experiments and so one way
to think that it is if if money were no
issue if you had infinite money what
would you do or the counter to it is if
everything was free or if this one thing
was free then what would you do
differently and so I think that can help
spark the initial ideas and then once
you kind of have the crazy out there
idea then you work backwards and make it
more into reality for example a lot of
startup tech companies have problems
hiring tech talent so what if there’s a
line out the door of amazing engineers
then what would you do differently and
then that might shift the thinking into
okay how do we get a line out the door
of really talented engineers and and
make that the problem the real problem
that you’re trying to protect or
actually back to Zappos is Sri in the
early days we had trouble hiring people
that were really good buyers that good
at merchandising initially the front
problem was framed as
how do we go and recruit more talented
buyers but then we reframed it as well
how do we the only way we can guarantee
kind of an endless supply of talent
buyers as if we basically grow and train
them ourselves and so now we have a
program where we hire people that are
entry-level and within three to five
years they have the potential to become
a senior leader within the company you
talk to managers and tell them you
should be spending ten to twenty percent
of your time outside the office with
your team initially the response from
some of them are well is that really
working we’re just hanging out and then
we ask the managers that have done it
how much more productive is your team
because there’s better communication and
higher levels of trust and people are
willing to do favors for each other
because they’re doing favors for friends
not for just a co-worker and in terms of
increased productivity the answers range
from anywhere from 20% to 100% so kind
of worst case scenario you break even I
mean we just we were fresh out of school
had just didn’t know what we were doing
and I think I’d say one of the lessons
that actually you would think we’ve
learned the first time but kind of
repeats itself throughout history is
actually just not having enough
self-confidence right like thinking oh
if we hire this external person that has
this great resume then they’ll be great
in you know it feels weird but but they
must know more than we do in and I think
one of the lessons we learned through
link exchange was actually if you’re one
of the co-founders you probably know
more about the business then you know
someone that’s just coming in from the
outside but we were young at the time
and didn’t know that one of our
interview questions is on a scale of one
to ten how weird are you and you know if
you’re one you might be a little bit too
straight-laced for the Zappos culture
ten maybe a little bit too psychotic for
us but really it’s not so much the
number that we care about its how they
answer because our belief is that
everyone is a little weird somehow and
this is really more just a fun way
saying that we really recognize and
celebrate each person’s individuality
and we
they’re true personalities to come out
and shine in the workplace you know
there’s so many people where they’re a
different person at home on weekends
versus when they’re inside the office
and people in corporate America leave a
little bit of themselves or in a lot of
cases big part of themselves at home and
we really strive to create an
environment where people are just
comfortable being themselves so instead
of worrying about work/life separation
it’s about work/life integration where
it’s just the same person and you know
not only are you comfortable being
yourself but when you connect with your
co-workers it’s not just co-worker
relationships but true friendships that
end up forming where you would choose to
hang out with these people even if you
weren’t working at the same company
together so these are some of the
questions that we ask ourselves in terms
of thinking about how to deliver great
customer service and we internally use
the word Wow when thinking about how
would you treat customers but we use it
as a verb we talk about how do we bow
our customers and also how do we allow
our employees and the vendors that we
work with and it starts with the
policies you see on our website we offer
free shipping both ways so a lot of
people will order 10 different pairs of
shoes try them on in the comfort of
their living room with 10 different
outfits and then send back the ones that
don’t fit or they don’t like and we
encourage that type of behavior we have
a 365 day return policy for people that
I guess have trouble committing or
making up their minds and you know they
can take well to to return products and
you know most websites it’s very hard to
find contact information usually it’s
buried 5linx deep and maybe it’s an
email address you can only email once
whereas for us we take the exact
opposite approach we put our 1-800
number on the top of every single page
of our website because we actually want
to talk to our customers
and it’s funny because sometimes I’ll be
speaking at a branding or marketing
conference and there’s a lot of
discussion about consumers being
bombarded with thousands and thousands
of marketing messages every day how do
you get your message to stand out how to
get your brand to stand out in you know
should they be investing millions of
dollars in this 30-second Superbowl ad
that people may or may not be paying
attention to or should they be
leveraging the latest in the social
media fad and for us as kind of low-tech
and unsexy as it may sound we found that
the telephone is actually one of the
best branding devices out there because
we have the customers undivided
attention for five to ten minutes and if
we get the interaction right we find
that the customers remember that for a
very long time and tell their friends
and family about us and we run our call
center very differently for most call
centers we don’t have scripts we don’t
have this concept of average handle time
which most call centers have which is
all about how quickly can you get the
customer off the phone in the name of
being more efficient but we’re not
trying to maximize for efficiency we’re
trying to maximize for the customer
experience and we don’t upsell and so
going back to the know call time
actually just got an email last night a
new record was set for the longest phone
call ever it was eight hours and three
minutes long so yeah I don’t know how
the bathroom situation worked effort for
that one but so and it may seem weird
that you know for us we’re an Internet
company 95% of our sales go through the
website so why do we focus so much on
the telephone and what we found is
actually on average almost every
customer calls us at least once sometime
during their lifetime and it’s actually
usually not to place an order
most of our phone calls do not result in
orders it might be their first time
going through the returns process and
they just need help
stepping through the process of printing
out a return label for the first time or
maybe they have a wedding over the
weekend and they just want some fashion
advice and I think we have some
customers that call us because they’re
lonely and well we’ll talk to them as
well so so that’s our call center and
then for our warehouse we actually run
it very differently from most warehouses
as well most warehouses they let the
orders pile up so that when the picker
needs to walk around there’s higher
picking density more efficient doesn’t
need a walk as far for us we run our
warehouse 24/7 which is not the most
efficient way to run our warehouse and
but we’re not trying to maximize for
efficiency and because we run it 24/7
and because our warehouse is located in
Kentucky right next to the UPS hub and
because we do these surprise upgrades to
overnight shipping for a lot of most of
our repeat loyal customers when you
combine all three of those things a lot
of customers order as late as midnight
Eastern Time and the shoe show up on
their doorstep eight hours later when
they’re expecting it a week later and
that creates that whole emotional
response we’re trying to be listed in
that Wow experience that causes them to
remember us for a very long time and
tell their friends and family about us
the ultimate definition of success is
you could lose everything that you have
and truly be ok with it your happiness
isn’t based on external factors could
you lose everything and be happy I think
that would actually be a fun challenge
thank you so much for watching I made
this video because ghulam Attard
I hope I pronounced that right ask me
too so there’s a famous entrepreneur
that you want me to profile next leave
it in the comments below and I’ll see
what I can do
I’d also love to know which of Tony
Shea’s top 10 rules had the biggest
impact on you leave it in the comments
and I will join the discussion thank you
so much for watching continue to believe
and I’ll see you soon
and venture capitalist he’s the CEO of
the online shoe and clothing store
Zappos
prior to joining Zappos he co-founded
link exchange which he sold to Microsoft
for two hundred and sixty-five million
dollars he’s Tony Hsieh and here are his
top ten rules for success the great
companies had a vision that had a higher
purpose beyond just money or profits or
being number one in a market and kind of
the irony there is that by not making
profits the number one priority of the
company or the higher purpose of the
company it actually enabled these
companies to make generate more profits
in the long term so sometimes when I
speak at entrepreneur conferences I get
asked what’s a good market to get into
where it can make a lot of money and my
response is amiss instead of thinking
about where you can make a lot of money
think about what are you so passionate
about doing that you’d be happy doing it
for ten years and even if you never made
a dime and that’s what you should be
doing and kind of the ironic thing is
the money will actually follow so you
know we’ve all heard of Craigslist he
didn’t set out to make money he was
passionate about the community and now
it’s one of the top traffic websites on
the internet so I like to say chase the
vision not the money there was a movie
that came out a I think a couple years
ago I called notorious I think it only
lasted a week in the movie theater but
but I saw it and I in it
biggie smalls also known as notorious
b.i.g is well Puff Daddy says to biggie
smalls don’t chase the paper chase the
dream I just want an excuse to put this
picture up here anyways so if you’re an
entrepreneur say think about what would
you be so passionate about doing that
you’d be happy doing it for 10 years
even if you never made a dime from it
and if you have employees now what’s the
larger vision and greater purpose in
their work beyond just money or profits
or being number one
in a market company culture was always
important and myself and Fred and I
interviewed everyone when we were still
in San Francisco basically until we can
do that anymore because there were too
many employees to interview but but
basically we wanted to we had we had
this criteria of you know
yes interview for the normal business
technical stuff but they meet the bar
right technically so do the normal set
of interviews but then you kind of had
this final test of like is this someone
I was choose to hang out with or grab a
drink with and if the answer was if we
weren’t in business together if the
answer was no then we would an entire
them so that goes against a lot of the
things that you know I’ve heard out
there in the past it’s like keep your
work and personal relationship separate
you know like that’s kind of been like a
thing that’s been stated out there like
there should be just firewall between
the two but you went and said okay it’s
very important that I can actually get
along with this person this is a someone
I could go out have a beer with why was
that so important to you
um I guess I have two answers to that
one is yes there are companies that
focus on work/life separation or
work-life balance and at Zappos we
really focus on work-life integration
and you know at the end of the day it’s
just life so you might as and especially
if you spend so much time at work like
you better hopefully enjoy the time that
you’re spending there and the people
that you’re with so that’s one answer
and then the other answer is and I don’t
think the book existed at the time of
Zappos was founded but Jim Collins his
book good to great researched and looked
at what separated the great companies in
terms of long term financial performance
from just the good ones or mediocre ones
and found that the great ones had two
important ingredients that separated
them from just the good ones are
mediocre ones and one of them was that
they all had strong cultures and
and you know we formalize the definition
of our culture into we have ten core
values at Zappos and one of the actually
really interesting things I found from
the research was that it actually
doesn’t matter what your values are what
matters is that you have them in that
you line the organization around them
and the power actually comes from the
alignment not from the actual value so
there’s no judgment of values and so
we’re not out there telling people oh
you should adopt the Zappos values and
culture and so on because actually that
would probably not work in most cases
and where our message is more you should
figure out where your values are and
then align the entire organization
rhythm so our whole philosophy is let’s
take most of the money that we would
have spent on paid advertising or paid
marketing and rather than by our
exposure instead let’s invest it into
customer service in the customer
experience and let our customers do the
marketing for us through word-of-mouth
on any given day about 75% of our orders
are from repeat customers and we
basically grew from no sales in 1999 to
in 2008 was the first year where we hit
a billion dollars in gross merchandise
sales and actually even despite the bad
economy we’ve actually continued to grow
over the last two years in fact our net
sales were q1 this year we’re up almost
50% year-over-year and people asked us
what do we do differently over the last
24 months and it’s actually we actually
didn’t do anything differently and it’s
not because of anything we did over the
past two years it’s because of all the
investment we made prior to that that we
continue to grow because of the loyalty
of our customers and the number one
driver of all that growth is through
repeat customers and word-of-mouth I
would say probably the biggest thing is
it’s just patience and and I don’t mean
patience as as in in terms of just you
know sitting around and hoping something
miraculous will happen but really when
you’re making decisions for your
business thinking long term and think
about what is actually going to make a
difference 10 years from now and what’s
actually going to make a difference even
two or three years from now but I think
most people get stuck in what’s going to
make a difference
this week or this quarter or even this
year and and you know when you think
longer-term the decisions you make end
up being very different and so things
like culture for example if your culture
you know suddenly goes downhill tomorrow
or assembly improves tomorrow you’re not
going to see the effects in this quarter
or this year or even in terms of your
bottom line but two or three years down
the road you will and same thing with
customer service if if we hypothetically
stopped answering our phones and fired
everyone in our call center that would
actually have a huge gain in our profits
for 2009 I don’t think it would hurt our
top-line revenue we’d still do over a
billion and growth sales but two or
three years from now then we’d start
feeling the effects so I think the
biggest thing is just how how long-term
are you thinking I always like doing
these thought experiments and so one way
to think that it is if if money were no
issue if you had infinite money what
would you do or the counter to it is if
everything was free or if this one thing
was free then what would you do
differently and so I think that can help
spark the initial ideas and then once
you kind of have the crazy out there
idea then you work backwards and make it
more into reality for example a lot of
startup tech companies have problems
hiring tech talent so what if there’s a
line out the door of amazing engineers
then what would you do differently and
then that might shift the thinking into
okay how do we get a line out the door
of really talented engineers and and
make that the problem the real problem
that you’re trying to protect or
actually back to Zappos is Sri in the
early days we had trouble hiring people
that were really good buyers that good
at merchandising initially the front
problem was framed as
how do we go and recruit more talented
buyers but then we reframed it as well
how do we the only way we can guarantee
kind of an endless supply of talent
buyers as if we basically grow and train
them ourselves and so now we have a
program where we hire people that are
entry-level and within three to five
years they have the potential to become
a senior leader within the company you
talk to managers and tell them you
should be spending ten to twenty percent
of your time outside the office with
your team initially the response from
some of them are well is that really
working we’re just hanging out and then
we ask the managers that have done it
how much more productive is your team
because there’s better communication and
higher levels of trust and people are
willing to do favors for each other
because they’re doing favors for friends
not for just a co-worker and in terms of
increased productivity the answers range
from anywhere from 20% to 100% so kind
of worst case scenario you break even I
mean we just we were fresh out of school
had just didn’t know what we were doing
and I think I’d say one of the lessons
that actually you would think we’ve
learned the first time but kind of
repeats itself throughout history is
actually just not having enough
self-confidence right like thinking oh
if we hire this external person that has
this great resume then they’ll be great
in you know it feels weird but but they
must know more than we do in and I think
one of the lessons we learned through
link exchange was actually if you’re one
of the co-founders you probably know
more about the business then you know
someone that’s just coming in from the
outside but we were young at the time
and didn’t know that one of our
interview questions is on a scale of one
to ten how weird are you and you know if
you’re one you might be a little bit too
straight-laced for the Zappos culture
ten maybe a little bit too psychotic for
us but really it’s not so much the
number that we care about its how they
answer because our belief is that
everyone is a little weird somehow and
this is really more just a fun way
saying that we really recognize and
celebrate each person’s individuality
and we
they’re true personalities to come out
and shine in the workplace you know
there’s so many people where they’re a
different person at home on weekends
versus when they’re inside the office
and people in corporate America leave a
little bit of themselves or in a lot of
cases big part of themselves at home and
we really strive to create an
environment where people are just
comfortable being themselves so instead
of worrying about work/life separation
it’s about work/life integration where
it’s just the same person and you know
not only are you comfortable being
yourself but when you connect with your
co-workers it’s not just co-worker
relationships but true friendships that
end up forming where you would choose to
hang out with these people even if you
weren’t working at the same company
together so these are some of the
questions that we ask ourselves in terms
of thinking about how to deliver great
customer service and we internally use
the word Wow when thinking about how
would you treat customers but we use it
as a verb we talk about how do we bow
our customers and also how do we allow
our employees and the vendors that we
work with and it starts with the
policies you see on our website we offer
free shipping both ways so a lot of
people will order 10 different pairs of
shoes try them on in the comfort of
their living room with 10 different
outfits and then send back the ones that
don’t fit or they don’t like and we
encourage that type of behavior we have
a 365 day return policy for people that
I guess have trouble committing or
making up their minds and you know they
can take well to to return products and
you know most websites it’s very hard to
find contact information usually it’s
buried 5linx deep and maybe it’s an
email address you can only email once
whereas for us we take the exact
opposite approach we put our 1-800
number on the top of every single page
of our website because we actually want
to talk to our customers
and it’s funny because sometimes I’ll be
speaking at a branding or marketing
conference and there’s a lot of
discussion about consumers being
bombarded with thousands and thousands
of marketing messages every day how do
you get your message to stand out how to
get your brand to stand out in you know
should they be investing millions of
dollars in this 30-second Superbowl ad
that people may or may not be paying
attention to or should they be
leveraging the latest in the social
media fad and for us as kind of low-tech
and unsexy as it may sound we found that
the telephone is actually one of the
best branding devices out there because
we have the customers undivided
attention for five to ten minutes and if
we get the interaction right we find
that the customers remember that for a
very long time and tell their friends
and family about us and we run our call
center very differently for most call
centers we don’t have scripts we don’t
have this concept of average handle time
which most call centers have which is
all about how quickly can you get the
customer off the phone in the name of
being more efficient but we’re not
trying to maximize for efficiency we’re
trying to maximize for the customer
experience and we don’t upsell and so
going back to the know call time
actually just got an email last night a
new record was set for the longest phone
call ever it was eight hours and three
minutes long so yeah I don’t know how
the bathroom situation worked effort for
that one but so and it may seem weird
that you know for us we’re an Internet
company 95% of our sales go through the
website so why do we focus so much on
the telephone and what we found is
actually on average almost every
customer calls us at least once sometime
during their lifetime and it’s actually
usually not to place an order
most of our phone calls do not result in
orders it might be their first time
going through the returns process and
they just need help
stepping through the process of printing
out a return label for the first time or
maybe they have a wedding over the
weekend and they just want some fashion
advice and I think we have some
customers that call us because they’re
lonely and well we’ll talk to them as
well so so that’s our call center and
then for our warehouse we actually run
it very differently from most warehouses
as well most warehouses they let the
orders pile up so that when the picker
needs to walk around there’s higher
picking density more efficient doesn’t
need a walk as far for us we run our
warehouse 24/7 which is not the most
efficient way to run our warehouse and
but we’re not trying to maximize for
efficiency and because we run it 24/7
and because our warehouse is located in
Kentucky right next to the UPS hub and
because we do these surprise upgrades to
overnight shipping for a lot of most of
our repeat loyal customers when you
combine all three of those things a lot
of customers order as late as midnight
Eastern Time and the shoe show up on
their doorstep eight hours later when
they’re expecting it a week later and
that creates that whole emotional
response we’re trying to be listed in
that Wow experience that causes them to
remember us for a very long time and
tell their friends and family about us
the ultimate definition of success is
you could lose everything that you have
and truly be ok with it your happiness
isn’t based on external factors could
you lose everything and be happy I think
that would actually be a fun challenge
thank you so much for watching I made
this video because ghulam Attard
I hope I pronounced that right ask me
too so there’s a famous entrepreneur
that you want me to profile next leave
it in the comments below and I’ll see
what I can do
I’d also love to know which of Tony
Shea’s top 10 rules had the biggest
impact on you leave it in the comments
and I will join the discussion thank you
so much for watching continue to believe
and I’ll see you soon
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