Lessons from — Delivering Happiness

Lessons from — Delivering Happiness

This autobiography did not disappoint. I especially enjoyed the first half of the book. It is where Tony recounts some of his first business ventures. The first one he created in elementary school. The inspiration came from a book he borrowed from his friend, called Free Stuff for Kids.
In it, he found a button-making kit for $50. He checked in another book if there were already other companies offering photo pin-on buttons, he found none.
He typed a letter to the publisher presenting his button-making business and the publisher answered a couple of months later accepting his request, in the next edition, Tony’s not yet existing button-business would be published as a legit company.
He told his parents that he’d need $50 to buy the button-making kit, as soon as he’d make the money he would pay them back. They accepted. He soon got his first order. Easy money. Since then the button-business flourished for years and eventually got transferred to his younger siblings.

This is just one of the examples of Tony’s spirit to invent ways to make money. Missing running a business at college, he bought a couple of hundred frozen burgers from the nearest McDonald’s which he sold on the campus. He was able to charge good money for the burgers because due to some law, McDonald’s wasn’t allowed to sell on the campus at that time.

When he got tired from his burger business he instead decided to switch to the pizza business. He realized pizzas were a very high-margin business.

A large pizza cost less than $2 to make but could be sold for $10 (or more with additional toppings). And even more money could be made by selling pizzas by the slice. After some research, I discovered it would cost about $2,000 to invest in pizza ovens. It seemed like it was worth the risk, so I took a deep breath and wrote a check for $2,000. I also wanted to make the grill more of a place where people wanted to hang out, so I spent many nights recording music videos from MTV onto videotape, pausing the recording anytime a commercial came on, because this was the pre-TiVo era. The videos playing in the background turned out to be a big hit, and combined with the new pizza offering, we ended up tripling sales at the grill compared with the previous year. The $2,000 investment was recouped within a couple of months. It was through the pizza business that I met Alfred, who eventually would join Zappos as our CFO and COO. Alfred was actually my number one customer, and he stopped by every night to order a large pepperoni pizza from me. We had two nicknames for Alfred while in college: “Human Trash Compactor” and “Monster.” He earned these nicknames because every time a group of us would go out to a restaurant (usually it was a group of ten of us at a late-night greasy Chinese place called The Kong), he would literally finish everyone’s leftovers from their plates. I was just thankful that I wasn’t one of the roommates he shared his bathroom with. So to me, it really wasn’t that weird that Alfred would stop by every night to order an entire pepperoni pizza from me. But sometimes he would stop by a few hours later and order another large pepperoni pizza. At the time, I remember thinking to myself, Wow, this boy can eat. I found out several years later that Alfred was taking the pizzas upstairs to his roommates, and then selling them off by the slice. So I guess that’s why we ended up hiring him as our CFO and COO at Zappos. We ended up doing the math a few years ago and figured out that, while I made more money from the pizza business than Alfred, he made about ten times more money per hour than me by arbitraging pizza. (There was also a lot less risk on his part. The grill was the victim of a burglary one night where $2,000 was stolen. At the end of the year, I figured I had effectively made about $2 an hour.) I didn’t know it at the time, but our pizza relationship was the seed that would lead to many million-dollar business opportunities together down the road.

Relationships create business opportunities

While reading this book I soon realized a common theme. Tony built excellent relationships with his colleagues which then lead to many business opportunities. This is basically how he built his first startup. First, talked to his friend about how he was bored to death at work, his friend felt the same. They figured why not take advantage of that new thing called the World Wide Web and build something on weekends.

They ended up quitting their jobs and dedicating the time to their startup called Internet Link Exchange which was sold for $265 million a couple of years later. What fascinates me is that during all of Tony’s business ventures, he always drew on connections he’d made at some point in college or elsewhere. For instance the first employees of what would become Zappos where all originating from a group of friends and friends of friends.

Realizing Money doesn’t bring happiness

After selling ILE Tony spent a lot of time thinking. He thought about what made him happy and this was what he found. Things weren’t really better, the money didn’t really make him happy. He realized that building things is what he enjoyed and what brought him happiness.

I made a list of the happiest periods in my life, and I realized that none of them involved money. I realized that building stuff and being creative and inventive made me happy. Connecting with a friend and talking through the entire night until the sun rose made me happy. Trick-or-treating in middle school with a group of my closest friends made me happy. Eating a baked potato after a swim meet made me happy. Pickles made me happy. (Although for that one, I’m still unclear why. I think it’s just because they are obviously delicious and I enjoy saying “pickles.”) I thought about how easily we are all brainwashed by our society and culture to stop thinking and just assume by default that more money equals more success and more happiness when ultimately happiness is really just about enjoying life. I thought about how I enjoyed creating, building, and doing stuff that I was passionate about. And there was so much opportunity to create and build stuff, especially with the Internet still exploding, and not enough time to pursue every idea out there.

Building the ultimate tribe fortress

Focusing on new ventures, Tony remembered a childhood dream of his. He always had wanted to live above a movie theater. As serendipity it has, he found the perfect location which even had a Taco Bell less than two blocks away. He decided to take over a part of the building with his group of friends.

I told other ex-LinkExchangers about the space. I thought back to my college years, when there was a core group of us who always hung out together. We could create our own adult version of a college dorm and build our own community. It was an opportunity for us to create our own world. It was perfect. One by one, our crew started moving into the lofts. Alfred ended up living two doors down from me. By the time all of us had moved in, we collectively owned 20 percent of the lofts in that building and controlled 40 percent of the board seats of the homeowners’ association. It was like we were playing our own private real-life version of Monopoly. And nothing could compare to the spontaneity and convenience of being able to stroll over in pajamas to a friend’s place or to the movie theater.

Later, this ecosystem turned out indispensable for the development and survival of Zappos.

Building culture and a people pipeline

Without going into too much detail about Zappos, I just want to highlight what I find to be the most remarkable lessons to learn from that company, culture and a people pipeline.
The idea of culture is pretty simple actually. Create a happy and healthy culture, and your team will automatically infect your customers with happiness. Culture became such an important concept at Zappos that eventually the Culture-book came up. This is how it happened.

To keep our culture strong, we wanted to make sure that we only hired people who we would also enjoy hanging out with outside the office. As it turned out, many of the best ideas came about while having drinks at a local bar. There was a group of about ten of us hanging out one night talking about how we could make sure that we continued to hire only people who would fit into the Zappos culture. There was a new hire in the group, so I asked each person to talk about the Zappos culture. We each gave our own interpretation. When everyone was done, I felt that the new hire had gotten a pretty good idea of our culture. “I wish we had recorded our past twenty minutes of conversation so that we could show it to all new hires,” I said. “Yeah,” someone else said. “That would have been pretty cool.” “Or we could have transcribed it and given it as a handout to prospective employees,” someone else chimed in. “You know what?” I said. “We should just ask all of our employees to write a few paragraphs about what the Zappos culture means to them, and compile it all into a book.” And just like that, the idea for the Zappos Culture Book was born, and it’s been a part of Zappos ever since. Every year, a new edition of the Zappos Culture Book is produced, which we give out to prospective employees, vendors, and even customers.

People Pipeline

Many corporations like to say that their people are their most important asset. There are a few problems with that approach. First, as soon as someone leaves, you’ve lost an asset. Second, if the company grows, then there may come a time later down the line when the company outgrows an employee because the employee still has the same skill set that he had when he first joined. When that happens, usually the solution in a lot of other companies is to bring in a more experienced employee from outside the company, which presents a third challenge: That new employee often may not be a culture fit. Our philosophy at Zappos is different. Rather than focusing on individuals as assets, we instead focus on building as our asset a pipeline of people in every single department with varying levels of skills and experience, ranging from entry level all the way up through senior management and leadership positions. Our vision is for almost all of our hires to be entry level, but for the company to provide all the training and mentorship necessary so that any employee has the opportunity to become a senior leader within the company within five to seven years. For us, this is still a work in progress, but we’re really excited about its future. Without continually growing and learning both personally and professionally, it’s unlikely that any individual employee will still be with the company ten years from now. Our goal at Zappos is for our employees to think of their work not as a job or career, but as a calling. Our pipeline strategy started when we first moved to Vegas in 2004. Even though Vegas was great for hiring for our call center, we found it challenging to convince merchandisers and buyers who had years of industry experience to move from places such as Los Angeles or New York to Las Vegas. So we decided to start training and growing our own merchants from the ground up. Today, nearly all of the hires for our merchandising department are for entry-level merchandising assistants. We have a three-year merchant development program where merchandising assistants are trained, certified, and given increasing portfolio responsibilities as well as put into management and leadership roles. At the entry level, all we really care about is if they are passionate about the category of product their team is responsible for. For our couture team, we hire people who love reading fashion magazines. For our running team, we hire marathoners. For our outdoors team, we hire people who regularly go hiking and camping on weekends. Over a three-year period, merchandising assistants are promoted to assistant buyers and then to buyers. (After three years, they can go on to become senior buyers, directors, and eventually VPs.) Our pipeline philosophy has been incredibly successful within our merchandising department, and we’ve spent the past year working on rolling out similar programs for all of our departments. There are specific training programs that are unique to each department, but we also have a Pipeline Team that offers courses for all departments. Many of the courses are required in order for an employee to be promoted to certain levels within the company, regardless of which department he or she may be in.

I’ll end this post here even though there are so many more gold nuggets you have to read the book to have the right context to fully appreciate.

Get the book here.