Tony Hsieh’s earlier Business experiences

Delivering Happiness: A Path to Profits, Passion, and Purpose. I started this book because it was mentioned several times in Alex’s book The Third Door. I just felt this very intense intuition that it would turn out to be a great book to read for me at this time, turned out to be right. I love it so far. I can relate to so much of what Tony shares about his earlier experiences at work. The following chapters I particularly loved and wanted to share with you.

You Win Some, You Lose Some

Out in the Real World

Sanjay and I both got offers from Oracle.

I had a few different job offers, but it was a pretty easy decision to accept Oracle’s. Not only did they offer me the most money ($40k per year in 1995 was pretty good pay for a job straight out of college), but they also were going to pay for moving all of the stuff I had accumulated during my college years to California, plus put Sanjay and me up in corporate housing for free for a few weeks while we were going through the training program for new hires.

I felt that I’d succeeded. I’d won the game of what I was told college was supposed to be all about: getting a job that paid as much money as possible. As I compared job offers that my other roommates had gotten, it was pretty clear that Sanjay and I were both going to be making more money than any of the rest of them.

A few months later, Sanjay and I were in the same new hire training class at Oracle together. This was a three-week program, and we were with twenty other people who had just graduated from college as well. Those three weeks flew by. It was basically a crash course in database programming. We had challenging and exciting projects. I really felt that I was learning a lot, making new friends, and most importantly, making good money. At the end of the training class, I was looking forward to meeting my new boss to start my new job.

I actually had no idea what I would be doing or what to expect. I really hadn’t done any research on Oracle. All I knew was that they had sent someone to interview me on campus while I was in college and that they were impressed by my transcript. They really didn’t know who I was, and I didn’t really know who they were. I just knew I was supposed to be a “software engineer” and that they were paying me $40k.

On day 1 of my real job at Oracle, I was shown my desk and told what my ongoing tasks and responsibilities would be. Basically, I was supposed to be doing technical quality assurance and regression tests. I had no idea what that meant but it really didn’t matter. I was making good money. And within a week, I learned that it was actually easy money too.

All I had to do was run a couple of tests every day. It took about five minutes to set up a test, and then about three hours for the automated test to run, during which time I would just be sitting around and waiting for the test to finish. So I could only run two or three tests a day at the most. I also realized that nobody was tracking what time I came in or left the office. In fact, I don’t think anyone really even knew who I was.

For the first month or so, I felt incredibly lucky. I couldn’t believe that I was getting paid good money to do something that took almost no effort. Sanjay and I had found an apartment that was seven minutes away from the office, and we were roommates once again.

Within a week, I had my daily routine down:

  • 10:00 AM—Show up at my desk.
  • 10:05 AM—Start running one of the tests.
  • 10:10 AM—Check my e-mail, send e-mails to friends from my training class.
  • 11:30 AM—Go home for lunch.
  • 12:30 PM—Take a nap.
  • 1:45 PM—Head back to the office.
  • 2:00 PM—Start running another one of the tests.
  • 2:05 PM—Check my e-mail, respond to e-mails from friends in my training class.
  • 4:00 PM—Head back home.

I felt that I had lucked out because I had such an easy schedule, whereas Sanjay usually wouldn’t get home until 7:00 PM. I would occasionally ask him how his job was, and he’d shrug and say something like “It’s okay. Not that exciting.”

I told him that my job was really not that exciting either, but maybe we could work on something during the evenings and weekends together for fun to help combat the boredom. There was that thing called the World Wide Web that was starting to become more and more popular. Sanjay was really good at graphic design, so maybe we could start something on the side where we could create Web sites for other companies.

The idea of starting our own side business sounded pretty fun. We decided to name the company Internet Marketing Solutions, or IMS for short. We created our own Web site, ordered a second phone line for our apartment, and went to Kinko’s to print out some customized business cards. We were ready to start signing up some customers.

We had a plan for how to sign up customers: First, we would approach the local chamber of commerce and offer to build their Web site for free. Then we could tell all the local businesses that the chamber was a customer of ours (avoiding any mention that they were not paying us), sign up as many local businesses as possible, and the money would start rolling in soon after.

So, first things first. We had to get the chamber of commerce to let us build their Web site. Even though our pitch to them involved no money, approaching them was my first cold call over the phone, which led to my first in-person sales call. I had set up a meeting with them for 12:30 PM, which would fit in perfectly with my daily Oracle routine.

On the day of my appointment, I was nervous. I had never made a successful sales call before, but I knew my mission was to convince them that they needed a Web site and that we were the right partners for them. I knew that appearances were important, so when I left Oracle to go on my lunch break at 11:30 AM, I went home first and put on the suit and tie I had worn for graduation a few months earlier. I made sure that I had plenty of business cards. And I brought a few of our brochures that Sanjay had created and printed up a couple of days earlier.

Although I was nervous, the meeting went well. They were particularly receptive to the fact that we were offering to do everything for free. Over the next few weeks, my lunch breaks got longer and longer, and I ended up spending most of my time during the day meeting with the chamber to make sure they were happy with what we were creating for them. Sanjay’s nights got longer and longer, as he was the one staying up all night actually creating their Web site. I was the sales and customer support guy, and he was the product and design guy. We made a good team.

We launched the chamber of commerce’s Web site within a month, and now we were ready to start getting paying customers. Our first target was the Hillsdale mall, which was the big mall down the street from where we lived. We thought that would make a good choice because if we were able to sign them up as a customer, then we would be able to approach each of the stores inside and tell them that the mall itself had signed with us so they should as well.

Over the next couple of months, I spent less and less time in the office at Oracle as I met with the Hillsdale mall and other small businesses. We eventually convinced the mall to pay us $2,000 to design, manage, and host their entire Web site.

We had done it! We had our first real paying customer. We could quit our unfulfilling and boring day jobs at Oracle so we could run our own business full-time.

And so we decided that’s what we were going to do.

I was a nervous wreck the morning that I was going to tell my boss at Oracle that I was quitting. After procrastinating for half an hour, I eventually worked up the courage to walk down the hallway to his office. I was ready to give him the news. Through his office window, he saw me approach and looked up. We made eye contact. I could feel my heart beating faster and faster. And then he looked away. I glanced over and realized at the last minute that he was meeting with someone else in his office, so I couldn’t tell him right then. I felt a huge sense of relief, and continued walking past his office, pretending that I was actually just on my way to the bathroom down the hall.

So I washed my hands and waited inside the bathroom for another couple of minutes to make it seem like I actually had gone to the bathroom. And then I walked past my boss’s office back to my desk and spent the next half hour e-mailing my friends. I figured that thirty minutes should be enough time for the meeting he was in to be over, but then I decided to wait another fifteen minutes after that just to be sure, and then started walking toward his office again.

For some reason, I was even more nervous the second time. I think maybe it’s because I wasn’t sure if he was still going to be meeting with whoever he was meeting with earlier. If he was still in that meeting, then I’d have to pretend I was making yet another trip to the bathroom, and he’d probably start thinking that I was maybe having some serious bladder or stomach issues. He was probably also thinking already that it was weird that I was using the bathroom close to his office instead of the one near my cubicle. But maybe he thought the one near me was out of order or something. I was pretty sure that all of these thoughts were running through his mind, so I was trying to convince myself that it didn’t really matter, it was going to be my last day anyway. But in the back of my head, I kept thinking that all he would remember ten years later would be me needing to use the bathroom multiple times within a short period of time on the wrong side of the building. That would be disastrous.

So I resolved to make sure that his last memory of me was not “that weird guy who needed to go to the bathroom a lot.” I had a plan. I would walk straight into his office and get this over with. So I marched over, telling myself that there was no turning back now. To make sure we didn’t accidentally have any awkward eye contact beforehand, this time I walked closer to the wall so that he couldn’t see me approach from far away. My heart racing, I saw that his door was open this time, and when I was finally in front of his door, I looked in, ready to tell him I was resigning.

Except there was nobody there.

This was going to go down in history as the most difficult resignation ever. I guess he had gone to another meeting or to lunch, so I decided to go to lunch as well. I would come back in the afternoon for Resignation Attempt Number Three.

So I let out a sigh and turned around. And ran right into my boss, who was behind me.

“Tony? Were you looking for me?” he asked.

I wasn’t mentally prepared for this scenario. I’d been thinking about what value meal I was going to order from Taco Bell. Surprised and flustered, I hurriedly mumbled an awkward “no, sorry” and walked away as fast as I could without arousing any more suspicion.

At Taco Bell, I made two very important decisions. I decided to try their Double Decker Taco value meal, which turned out to have a surprisingly calming effect on my stomach. I also decided that I would wait until tomorrow to resign. Clearly I was being given signs that today was not the right day.

When I got back to the office later that afternoon, I was a lot more relaxed knowing that I didn’t have to deal with resigning that day. I headed to the bathroom that was near my cubicle, only to be greeted with a sign on the door that said it was being cleaned and to please use the other bathroom—the one next to my boss’s office.

Luckily for me, I was now quite familiar with the location of that bathroom, so I headed there. As I approached the bathroom, I saw that my boss was alone in his office with the door open. I impulsively decided I just wanted to get this over with, so before I could think too much about it, I forced myself to walk into his office.

“Do you have a few minutes?” I asked. I closed the door and sat down across from him. This was now the point of no return.

“I’ve… decided to resign,” I said nervously. I’d only been at Oracle for five months and I hadn’t really accomplished anything there. I didn’t know how my boss would take the news. I was worried that he might be upset that I hadn’t been at Oracle for very long and was already leaving. Or maybe he knew I had been taking long lunch breaks and was secretly happy that I was leaving. Or maybe he didn’t care. The three seconds it took for him to respond seemed like three minutes.

“Wow! You must be joining another start-up! What an exciting opportunity!” He seemed genuinely excited and happy for me. He thought I was joining a company that had millions of dollars in venture-capital funding.

I didn’t have the heart to tell him that I was just bored at Oracle and wanted to have time to make more sales calls for the Web design business that Sanjay and I were doing out of our living room. At the rate we were going, we would actually be making a lot less money than we were at Oracle.

But we wanted to run our own business and be in control of our own destiny. This wasn’t about the money, it was about not being bored. Both Sanjay and I had now officially resigned, and we were ready to begin the next chapter of our lives. We had no idea where it would lead us, but wherever it was, we knew it had to be better than feeling bored and unfulfilled.

We were ready for an adventure.


As it turned out, the adventure we were waiting for to happen to us didn’t end up happening on its own. We ended up sitting around in our apartment, occasionally doing some Web design work, and going out every once in a while to try to drum up some more sales.

By the end of the first week, it dawned on me that neither of us was actually passionate about doing Web design work. We loved the idea of owning and running our own business, but the reality ended up being a lot less fun than the fantasy.

My parents were not exactly thrilled that I’d quit my job at Oracle without a real plan for what to do next. When I told my dad that Sanjay and I were planning on running a Web design business, he told me that it didn’t really sound like that could ever become a big-enough business to be meaningful. And now, one week into it, both Sanjay and I were starting to wonder if we’d made the right decision to leave Oracle.

The next few weeks were tough and somewhat depressing. We started to spend most of our time just surfing the Web to combat the boredom and to keep ourselves entertained. Watching Sanjay go into the coat closet to nap there in the middle of the day was only sort of funny the first time. We were starting to get a bit stir-crazy.

Luckily, we both had enough savings from the jobs we had in college that we didn’t need to worry about whether we would be able to pay the rent for the rest of the year. We didn’t know what we wanted to do, but we had learned what we didn’t want to do. We didn’t want to work for Oracle. We didn’t want to do any more Web design work. We didn’t want to make any more sales calls. And we didn’t want to be bored out of our minds.

So we spent our days and nights trying to figure out the next great Internet business idea, but we really couldn’t come up with anything that sounded good. One weekend, out of sheer boredom, we decided to do some computer programming to test out an idea for something we initially called the Internet Link Exchange (ILE), which we eventually renamed to just LinkExchange.

The idea behind LinkExchange was pretty simple. If you ran a Web site, then you could sign up for our service for free. Upon signing up, you would insert some special code into your Web pages, which would cause banner ads to start showing up on your Web site automatically.

Every time a visitor came to your Web site and saw one of the banner ads, you would earn half a credit. So, if you had a thousand visitors come to your Web site every day, you would end up earning five hundred credits per day. With those five hundred credits, your Web site would be advertised five hundred times across the LinkExchange network for free, so this was a great way for Web sites that didn’t have advertising budgets to gain additional exposure for free. The extra five hundred advertising impressions left over would be for us to keep. The idea was that we would grow the LinkExchange network over time and eventually have enough advertising inventory to hopefully sell to large corporations.

Sanjay and I finished all of the computer programming for our experiment over a weekend, and then we sent e-mails to fifty of our favorite small Web sites that we had found while surfing, asking them if they’d like to help test out our new service.

To our surprise, more than half the Web sites we e-mailed signed up to help us test out the service within twenty-four hours. As people visited their Web sites and saw the banner ads, word started to spread about LinkExchange. Within a week, we knew that our project that was initially meant to fight boredom had the potential to turn into something big. We decided that we should focus all of our energy on making LinkExchange a successful business.

The next five months were a bit of a whirlwind. Every day, more and more Web sites were signing up for our service. We weren’t really worried about trying to make money yet. We were just focused on growing the size of the LinkExchange network. We were excited to be creating something that was growing quickly and that other people really seemed to appreciate using.

Sanjay and I were working around the clock, spending half our time doing computer programming and the other half answering customer service e-mails. We were religious about trying to answer every e-mail that came in as quickly as possible. Usually we were able to answer them within ten minutes, and people were amazed at our responsiveness.

We got to the point where we couldn’t keep up with doing all the e-mail ourselves, so a friend who was visiting from out of town decided to help out and ended up never leaving. It was an exciting, fun, magical, and surreal time for all of us. We knew we were on to something big, we just had no idea how it would turn out. All the days started blurring together. We literally had no idea what day of the week it was.

One day in August 1996, we received a phone call from a guy named Lenny. He was calling from New York and he said he wanted to buy advertising on our network and also explore the possibility of us selling the company to him. Sanjay and I agreed to meet him later that week in San Francisco for dinner.

We met at Tony Roma’s, a restaurant chain that specialized in all sorts of ribs. Lenny introduced himself as Bigfoot, which was apparently both the name of his company as well as his nickname. He ordered a Kahlúa drink, so I got the same thing. Sanjay, however, avoided the Kahlúa. He and Kahlúa had not been on good terms ever since that night that our college roommates forever refer to as “Kahlúa night,” when a few too many Kahlúa drinks were consumed (and later vomited back out into the toilet that we all shared as roommates).

Lenny told us he wanted to make us an offer: $1 million in cash and stock for us to sell LinkExchange to Bigfoot. As part of the deal, Lenny wanted us to move to New York to work for Bigfoot. Sanjay and I looked at each other, both of us in shock. LinkExchange was only five months old, and we now had the opportunity to sell it for $1 million. This could be a life-changing opportunity for us. We told Lenny we wanted a few days to think about it, but the only word that I could think of in my head was Wow.

Sanjay and I spent the next twenty-four hours talking about what we should do. We really believed that LinkExchange had the potential to be so much bigger, but it was also hard to turn down so much money. So we decided to tell Lenny that we would sell the company for $2 million cash. This way, Sanjay and I would be able to walk away with $1 million each after only five months of work. I had read somewhere that you’re in your best negotiating position if you don’t care what the outcome is and you’re not afraid to walk away. At $2 million, I would be happy whether the deal happened or not.

As it turned out, Lenny didn’t think we were worth $2 million (and I don’t think he actually had $2 million either), so we agreed to go our separate ways but continue to keep in touch.

“LinkExchange is a once-in-a-lifetime opportunity,” Lenny said. “I’ve made a lot of money in my lifetime, but I’ve also lost a lot of money when I decided to bet the farm instead of taking money off the table. I wish you the best of luck.”

Sanjay and I were more motivated than ever to make sure that LinkExchange would be successful. We had to prove Lenny wrong.

As more and more people signed up for our service, Sanjay and I realized that we needed a lot more help, both on the customer service side of things as well as with computer programming. In addition to convincing friends who were visiting us from out of town not to go home and instead help us answer e-mails, we also started looking for more computer programmers.

I remembered that in college, I had been in an international computer programming competition. Each college was allowed to send a team of their best three computer programmers to compete against teams from the other colleges. The team I was on ended up winning first place in the competition. I decided that I should reach out to Hadi, who had been one of my teammates during one of my years on the team, to see if he would be interested in joining LinkExchange.

Back in college, I’d learned that Hadi was interested in magic, so we had briefly discussed the idea of putting on a magic show in the college amphitheater as a way of possibly earning some extra cash. We thought we could be the next David Copperfield duo, but in the end it never went anywhere because we were both too busy.

When I contacted Hadi, I asked him if he’d be interested in joining LinkExchange, and I gave him all the background information about how quickly we were growing, the $1 million offer we had just turned down, and how exciting everything was. He told me that it definitely did sound exciting, but he was busy in Seattle working at Microsoft, heading up the team that would launch a Web browser called Internet Explorer to compete with the Netscape browser, so he wouldn’t be able to join.

However, he told me he had a twin brother who looked just like him, and acted just like him. The two of them were so similar, he told me, that in college they used to go to each other’s job interviews and pretend to be the other person if one of them was too busy. I wondered whether they ever pretended to be each other when going on blind dates.

“So… you basically want us to hire your stunt double…?” I asked.


“Is that story about you going on job interviews for each other true?”


“Okay, sounds good. What’s your stunt double’s name?”


So after one meeting with Ali at our apartment, Sanjay and I decided to make him our third partner at LinkExchange, and we opened up a real office in San Francisco. Each of us started recruiting our friends to join LinkExchange, and one by one, they did.

By December of that year, there were twenty-five employees at LinkExchange, and most of them were friends of ours. That’s when Jerry Yang, the co-founder of Yahoo!, said he wanted to meet with us. Yahoo! had just had a very high-profile and successful IPO earlier that year, and was worth over $1 billion. Jerry was the poster child for the dot-com craziness of the time, so we were all pretty excited to get to meet an Internet celebrity. We were hopeful that we’d be able to work out some sort of advertising deal with Yahoo! to help accelerate our growth.

As it turned out, Jerry wasn’t interested in an advertising deal. He was interested in buying us, which came as a bit of a shock. We had to wait until the holidays were over because everyone in their corporate development office was on vacation, so we agreed to talk again in January.

After the New Year, he came and met with us in our old apartment and told Sanjay, Ali, and me the ballpark number of what they were willing to pay.

“Twenty million dollars.”

I tried my hardest not to flinch and to appear as calm as possible. The first thought that came to my mind was Wow. The second thought that came to my mind was I’m so glad we didn’t sell the company to Lenny five months ago.

We told Jerry that we would think about it and get back to him in a few days. This whole situation felt like déjà vu, except this time the numbers were bigger. Much, much bigger.

The next few days were filled with a lot of angst. We had told the rest of our employees what had happened, and that Sanjay, Ali, and I would be making the final decision. If we took the $20 million, I wouldn’t have to work again for the rest of my life.

As a thought experiment, I made a list of all the things I would do with the money if I had it:

  • I would buy a condo or loft in San Francisco so that I’d have a place to live that I could call my own, instead of renting a place and living with a roommate.
  • I would buy a big-screen TV and build a home theater.
  • I would want to be able to go on mini vacations (long weekends) whenever I wanted to, to places like Las Vegas, New York, Miami, and LA.
  • I would buy a new computer.
  • I would start another company, because I really enjoyed the idea of building and growing something.

I was surprised that my list was so short, and that it was actually pretty difficult for me to add anything else to it. With the savings I had from my previous jobs, I actually already had the ability to buy the TV and computer, and go on mini vacations. I just could never bring myself to do it.

I was already helping run a company that I was excited about. It seemed kind of silly to sell a company that I was excited about in order to start another company to be excited about. With the exception of actually owning my own place instead of renting, I realized that I already had the means to buy everything I wanted to buy.

Lenny’s words rang through my head over and over again: “LinkExchange is a once-in-a-lifetime opportunity.” I knew in my heart that, even if we failed, going after the opportunity was the right thing to do. It was much more important than owning a condo or loft at the age of twenty-three. Becoming a homeowner could wait until later in life.

I talked to Sanjay and Ali about my thought process, and they had independently come up with the same conclusion. We were still young. We could afford to be bold.

The next day we had a company meeting to announce our decision.

“As you all know, we received a term sheet from Yahoo! offering to buy the company, and we’ve been spending the last few days thinking about whether to accept their offer or not,” I began. You could feel the tension building in the room.

“We’ve decided to turn down their offer.”

As I looked around the room, I was surprised that there seemed to be a sense of relief in people’s faces. “We are living in a very special time,” I said. “The Internet industry is exploding. Companies like Netscape, eBay, Amazon, and Yahoo! are changing the course of human history. Never before have so many companies become successes in such a short period of time. We have the opportunity to be one of those companies while having the time of our lives.”

I’m not sure why, but for some reason I started feeling more and more emotional. My voice started shaking. I had to get my final words out and end the meeting, or else I would start crying:

“There will never be another 1997.”

It was us against the world, and we were going to make sure we would win.

The next few months were a blur. Somehow, everything seemed to fall into place as if there was someone watching over us making sure that we could do no wrong. Michael Moritz from Sequoia Capital, the same venture-capital firm that funded Yahoo!, became our board member and invested $3 million for a 20 percent stake in the company. More and more Web sites started signing up for our service, and we started signing some big advertisers to bring in revenue for the company. We hired a lot of smart, passionate employees (many of whom were friends of existing employees), and we had a lot of fun together. We were on top of the world.

I’m not quite sure how it started, but we had a really fun tradition at LinkExchange. Once a month, I’d send an e-mail out to the entire company letting them know that we were having an important meeting, and that some of our important investors and board members would be attending, so everyone was required to wear a suit and tie on the day of the meeting.

Everyone except for the most recently hired employees knew that it wasn’t a real business meeting, and that they didn’t actually need to wear a suit and tie. The real reason for the meeting was so that we could initiate and haze all the new employees who had joined LinkExchange in the past month.

So once a month, all the newly hired employees would show up to the office dressed up in suits and ties. There they would realize that they were the target of the companywide practical joke. In the afternoon meeting, all the new hires would be called up to the front of the room to complete some sort of embarrassing task.

After the Sequoia investment, we asked Michael Moritz to attend our initiation meeting, and we called him up to the front of the room along with the other six employees who had been hired in the past month.

After each person introduced himself, we let them know that in honor of Moritz’s presence, we decided that we wanted everyone to move together in unison to the music that was about to be played.

If you’ve ever read anything in the media about Moritz, he’s generally portrayed as an intelligent, introspective, and proper British journalist-turned-venture-capitalist, so everyone was excited to see that he was willing to stand in front of the room with the other new employees. Someone brought out a boom box and turned on the power as everyone started clapping and cheering. And then the music started playing. It was the Macarena.

I don’t think words can ever truly describe what watching Moritz being forced to do the Macarena was like. It ranks up there as one of the strangest sights to behold. Everyone in the entire room was cheering and laughing, and by the end of the song I had tears streaming down my face from laughing so hard.

I remember looking around the room at all the happy faces and thinking to myself, I can’t believe this is real. It wasn’t just about Moritz doing the Macarena or that everyone in the entire room was laughing. It was about everything that had happened in the past year. It just didn’t seem real.

In the words of Pretty Woman, I was living the fairy tale.