Delivering Happiness

Delivering Happiness Plot Summary

Introduction

Tony Hsieh's journey from a young entrepreneur experimenting with worm farming to the CEO of a billion-dollar company is as unconventional as it is inspiring. Born to Taiwanese immigrant parents, Hsieh demonstrated an early knack for entrepreneurship, whether selling custom buttons by mail order or orchestrating pizza arbitrage in his college dorm. But his story transcends mere business success. It is about the evolution of a visionary who discovered that building a company culture focused on happiness could create extraordinary results. Throughout this narrative, we follow Hsieh's transformation from a profit-focused businessman to a purpose-driven leader. His experiments with community building, customer service, and corporate culture at Zappos revolutionized how businesses approach these elements. What makes his story particularly compelling is his willingness to take risks and make personal sacrifices for his vision, including investing his own fortune to keep Zappos alive during difficult times. Through Hsieh's journey, we gain insights into creating meaningful work environments, developing authentic business values, and ultimately understanding that delivering happiness to others is perhaps the most fulfilling pursuit of all.

Chapter 1: Finding His Way: Early Ventures and Entrepreneurial Spirit

Tony Hsieh displayed entrepreneurial instincts from a remarkably young age. At nine, he attempted his first business venture: a worm farm. With childhood optimism, he purchased a box of earthworms for $33.45, built a worm box in his backyard, and fed them raw egg yolks, believing this would accelerate reproduction. Unfortunately, within a month, every worm had escaped through the chicken wire at the bottom of the box. Though his worm empire crumbled before it began, this early failure planted seeds of resilience that would serve him throughout his life. Growing up in a traditional Asian American household, Hsieh faced high expectations. His parents emphasized academic excellence, musical instrument mastery, and prestigious career paths. While he performed well academically, Hsieh's mind continually drifted toward business opportunities. In middle school, he created and sold a newsletter called "The Gobbler," and despite limited sales, he quickly pivoted to launching a mail-order button-making business advertised in "Free Stuff for Kids." This venture proved surprisingly successful, bringing in a steady $200 monthly income throughout his middle school years—eventually becoming a family enterprise passed down to his younger brothers. At Harvard, where he enrolled despite preferring Brown University, Hsieh continued his entrepreneurial experiments. Rather than focusing exclusively on academics, he found ways to create value and generate income. He took over the Quincy House Grille, a dining area in his dormitory, transforming it by introducing pizzas and creating a vibrant social atmosphere. The venture tripled sales compared to the previous year. It was during this pizza business that he met Alfred Lin, who would later become his CFO and COO at Zappos. Alfred, originally Hsieh's best customer, was secretly buying whole pizzas and reselling them by the slice—demonstrating the entrepreneurial mindset they shared. After graduation, Hsieh joined Oracle but quickly grew bored with corporate life. The job required minimal effort—he could complete his daily tasks within minutes and spent most of his time emailing friends or taking extended lunch breaks. This unfulfilling experience led him and his college roommate Sanjay to quit and start their own web design business. Though they lacked passion for web design, it gave them independence and eventually led to the creation of LinkExchange, an online advertising network they built over a weekend to combat boredom. LinkExchange grew explosively, attracting investments from Sequoia Capital and eventually selling to Microsoft for $265 million in 1998. However, the rapid growth came with unexpected challenges. As they hired beyond their friend network, the company culture deteriorated. By the time of the Microsoft acquisition, Hsieh felt alienated from the company he had built. Despite having to stay a year to receive his full payout, he eventually walked away from the remaining money to pursue something more meaningful. This experience taught him the crucial importance of company culture—a lesson he would carry forward to Zappos. The LinkExchange exit gave Hsieh financial freedom, but he soon realized that money alone didn't bring fulfillment. He began searching for something that combined profits with passion, setting the stage for his next chapter with Zappos. His early ventures, with all their successes and failures, had prepared him for building something much more significant than he could have imagined as a young worm farmer.

Chapter 2: Zappos Birth: Risk-Taking and Overcoming Challenges

In 1999, after selling LinkExchange to Microsoft, Hsieh and his college friend Alfred Lin formed Venture Frogs, an investment fund raised from former LinkExchange employees. Among the many pitches they received was a voicemail from Nick Swinmurn about a website called shoesite.com. Initially dismissive of selling shoes online, Hsieh's interest was piqued when Swinmurn mentioned that footwear was a $40 billion industry with 5% already being done through mail-order catalogs. They took a meeting, and despite Swinmurn's casual attire and limited industry experience, they saw his passion and eventually invested in what would become Zappos. The early Zappos model relied on drop shipping—showing shoes on their website and having manufacturers ship directly to customers when orders came in. While this approach required minimal capital, it created customer service problems. Inventory feeds were often inaccurate, and shipments were frequently delayed or incorrect. Fred Mossler, who left his secure position at Nordstrom to join Zappos, recognized that for the company to truly succeed, they needed to control their own inventory. This would mean a complete business model overhaul and substantial capital investment—a massive risk for the struggling startup. By 2002, Zappos faced a dire cash crisis. The company had drained Venture Frogs' resources, and Hsieh began investing his personal funds to keep Zappos afloat. When venture capital firms including Sequoia declined to invest, Hsieh made the extraordinary decision to sell his properties, including his cherished party loft. He liquidated nearly everything he owned to sustain the company, betting his entire fortune on Zappos' future. This period tested not only Hsieh's financial commitment but also his emotional resilience, as exemplified during his Kilimanjaro climb when he dreamt about selling his loft to save the company—a dream that later became reality. A critical turning point came when Zappos moved its warehouse operations to Kentucky near the UPS Worldport hub. After a disastrous attempt to outsource fulfillment to eLogistics (including a truck accident that scattered 20% of their inventory across a highway), they established their own warehouse operation called WHISKY (WareHouse Inventory System in KentuckY). This decision to control their own fulfillment became a cornerstone of their customer service strategy, allowing them to surprise customers with overnight shipping upgrades and maintain higher accuracy rates. By 2003, the combination of Hsieh's financial sacrifices, the shift to an inventory model, and a lifesaving credit line from Wells Fargo began to turn the tide. Zappos focused exclusively on delivering exceptional customer service—offering free shipping both ways, a 365-day return policy, and 24/7 customer support. They removed drop shipping entirely from their business model despite it being an easy revenue source, because it compromised the customer experience. This counter-intuitive decision to sacrifice short-term profits for long-term customer satisfaction embodied the risk-taking that defined Zappos' approach. The birth of Zappos was fraught with existential threats and required tremendous sacrifice. From maxed-out credit cards to selling personal assets, from warehouse disasters to banking rejections, the company survived only through relentless determination and a willingness to take calculated risks. These challenges forged a company culture that valued resilience and customer happiness above all else, setting the foundation for the success that would follow.

Chapter 3: Building Culture: Values as the Foundation for Success

The relocation of Zappos headquarters from San Francisco to Las Vegas in 2004 marked a pivotal moment in the company's cultural evolution. Initially driven by the practical need to find more customer service representatives, this move unexpectedly became the catalyst for crystallizing the Zappos culture. With seventy employees uprooting their lives to follow the company to a new city, a natural bonding occurred. Cut off from their established social networks, Zappos employees began spending more time together outside of work, transforming from mere colleagues into a tight-knit community. This transition period led Hsieh to recognize that culture should become their number one priority—even more important than customer service. His reasoning was straightforward: with the right culture, exceptional customer service would naturally follow. The first formal cultural initiative was the Zappos Culture Book, born from a casual bar conversation. Hsieh asked all employees to write a few paragraphs about what Zappos culture meant to them, compiling these unedited contributions into a book distributed to new hires, partners, and eventually customers. This radical transparency—publishing both positive and negative comments—demonstrated the authenticity that would become a Zappos hallmark. In 2006, after realizing that the company had grown too large for him to personally screen every new hire for cultural fit, Hsieh initiated the process of formalizing Zappos' core values. Rather than dictating these principles from the top down, he solicited input from the entire company. Over the course of a year, they distilled thirty-seven potential values into ten committable core values, including "Deliver WOW Through Service," "Embrace and Drive Change," and "Create Fun and a Little Weirdness." Unlike the aspirational but often ignored values statements at most companies, Zappos committed to hiring and firing based on these core values, regardless of an individual's technical expertise or potential contribution to the bottom line. The commitment to culture manifested in unique practices that outsiders often found puzzling. New hires, regardless of position, went through the same four-week training program that included two weeks answering customer service calls. During this training, Zappos offered $2,000 to anyone who wanted to quit—a "bribe" designed to weed out those who weren't fully committed to the company's mission. Internal communication included a monthly newsletter called "Ask Anything," where employees could anonymously pose questions that management would answer transparently. The office environment featured impromptu parades, employees dressed as pirates, and an annual "Bald & Blue" day where staff volunteered to have their heads shaved. Hsieh came to understand that a company's culture and brand were two sides of the same coin. While traditional branding relied on marketing departments crafting messages, Zappos recognized that in an increasingly transparent world, every employee interaction—whether with customers, vendors, or even strangers at a bar—shaped public perception of the company. By focusing intensely on culture, Zappos created an army of authentic brand ambassadors who genuinely believed in the company's mission. Perhaps most remarkably, Zappos' cultural commitment endured even during difficult times. In November 2008, amid economic turmoil, the company was forced to lay off 8% of its staff. Instead of disguising this as a "strategic restructuring" like many corporations, Hsieh sent a transparent email to all employees explaining the situation and posted it publicly on the company blog. He offered laid-off employees generous severance packages and healthcare coverage. This difficult period tested the company's values but ultimately strengthened them, demonstrating that culture wasn't just a fair-weather luxury but the foundation of their business approach in good times and bad.

Chapter 4: Customer Service Revolution: Changing Retail Online

Zappos transformed e-commerce by shifting focus from traditional metrics to delivering memorable experiences. While most online retailers obsessed over conversion rates and average order values, Zappos built its reputation on unexpectedly delighting customers. The company located its warehouse just fifteen minutes from the UPS Worldport hub in Kentucky, allowing customers who ordered as late as midnight EST to receive their purchases the following morning. Although this 24/7 warehouse operation wasn't the most efficient from a picking perspective, it created countless "WOW" moments when customers discovered their shoes arriving impossibly quickly. The company's approach to customer service calls stood in stark contrast to industry norms. Most call centers measured success by "average handle time," pressuring representatives to end calls quickly. Zappos eliminated time metrics entirely and famously celebrated its longest call—nearly six hours—as a success story. Representatives were never given scripts and were encouraged to let their personalities shine through. Most remarkably, they were trained to direct customers to competitors' websites if Zappos was out of stock on desired items. This counter-intuitive policy sacrificed immediate sales to build long-term trust and loyalty. Free shipping both ways became a cornerstone of the Zappos experience. While the additional shipping costs were substantial, Hsieh viewed them as a marketing expense rather than an operational burden. This policy encouraged customers to order multiple sizes or styles, try them at home with different outfits, and return what didn't work—creating a risk-free shopping experience that addressed the primary objection to online shoe shopping. Combined with a generous 365-day return policy, these practices eliminated barriers to purchasing and built customer confidence. The company's phone number appeared prominently at the top of every webpage—a stark contrast to competitors who buried contact information. Hsieh believed that while most companies viewed call centers as expenses to minimize, each phone call was actually an opportunity to strengthen emotional connections with customers. Though only about 5% of sales came through phone orders, Zappos recognized that nearly every customer would call at least once during their relationship with the company. Each call became a chance to create a lasting positive memory and build word-of-mouth marketing. Perhaps most revolutionary was Zappos' relationship with its vendors. Rather than squeezing suppliers for every last dollar—the industry standard—Fred Mossler established collaborative partnerships based on transparency and mutual success. Vendors received access to the same inventory and sales data as Zappos buyers through an "extranet" system. This unprecedented transparency empowered brand representatives to help manage their products on the site, effectively doubling the merchandising team's capacity. Annual vendor appreciation parties and monthly golf tournaments further cemented these relationships, resulting in exclusive online offerings and preferential inventory allocation during shortages. By 2008, Zappos had grown to over $1 billion in gross merchandise sales—two years ahead of their original goal. This extraordinary growth came primarily through repeat customers and word of mouth, not advertising expenditures. The company had successfully challenged retail orthodoxy by proving that extreme customer service could drive sustainable growth. Zappos demonstrated that online shopping didn't have to be impersonal or transactional—it could create emotional connections as powerful as any brick-and-mortar experience. This philosophy extended beyond footwear, establishing principles that would influence customer service across industries and setting new expectations for what online retail could be.

Chapter 5: Beyond Profits: Creating Meaning Through Passion and Purpose

As Zappos grew beyond its startup phase, Hsieh began exploring deeper questions about what made people truly happy at work and in life. Through his readings in positive psychology—particularly works like Authentic Happiness and The Happiness Hypothesis—he discovered scientific research that challenged conventional wisdom about what creates lasting satisfaction. Most people, including himself previously, operated under the assumption that achieving specific goals (wealth, career status, possessions) would lead to happiness. However, research showed that these achievements typically provided only temporary happiness spikes before people returned to their baseline contentment levels. This revelation led Hsieh to reconsider Zappos' ultimate purpose. In 2009, the company expanded its vision statement to "Delivering happiness to the world"—a significant evolution from earlier focuses on selection, customer service, and culture. This wasn't mere marketing language but reflected a fundamental shift in understanding how business could serve a higher purpose. Hsieh identified three types of happiness: pleasure (short-term, sensory gratification), passion (engagement in flow activities), and higher purpose (being part of something larger than oneself). Research indicated that the higher-purpose happiness was most enduring, yet most people and businesses focused primarily on chasing pleasure-based satisfaction. The company's commitment to employee development reflected this philosophy. Rather than viewing people as assets that might one day leave, Zappos created a "pipeline" approach to talent development. They established comprehensive training programs to grow their own leaders from entry-level positions, believing that almost anyone could advance to senior leadership within five to seven years given proper development. The Pipeline Team offered dozens of courses ranging from "Science of Happiness 101" to "Tribal Leadership," required for advancement regardless of department. This investment in holistic employee growth stood in stark contrast to most corporate training programs focused narrowly on job skills. Zappos also redefined success metrics to align with their purpose-driven approach. In the call center, they replaced annual raises with a "skill sets" system that gave employees control over their advancement pace. The merchandising department introduced smaller, more frequent promotions to create a sense of ongoing progress rather than distant milestones. These changes weren't just nice perks—they applied scientific findings about what truly increases human happiness: perceived control, perceived progress, connectedness, and being part of something meaningful. The company's public speaking engagements and tours of their headquarters became unexpected channels for spreading these ideas beyond Zappos. Initially motivated by business development, these activities revealed a hunger among other organizations for more meaningful workplace models. This led to the creation of Zappos Insights, an online video subscription service, and Zappos Insights Live, a two-day immersion seminar helping other businesses develop stronger cultures. Through these initiatives, Zappos began influencing companies far beyond retail, demonstrating that profits, passion, and purpose could coexist successfully. Perhaps most remarkable was how this purpose-driven approach transformed difficult business situations. When facing necessary layoffs in 2008, Zappos handled the process with unprecedented transparency and generosity. Rather than the typical corporate approach of minimizing severance and disguising cuts as "restructuring," they offered extended pay and healthcare coverage while openly acknowledging the emotional impact on their community. This authentic response to adversity demonstrated that their values weren't just for prosperous times but formed the foundation of all business decisions, even painful ones. Through this evolution, Zappos proved that businesses could aspire to more than profit maximization—they could become vehicles for creating meaning and delivering happiness to everyone they touched.

Chapter 6: The Amazon Acquisition: A Marriage of Visions

The Amazon acquisition story began with a fundamental misalignment between Zappos' leadership and its board of directors. By early 2009, Zappos had achieved remarkable success, making Fortune's "100 Best Companies to Work For" list and exceeding $1 billion in sales ahead of schedule. However, a growing tension emerged with their investors, particularly Sequoia Capital. While Hsieh, Alfred Lin, and Fred Mossler wanted to continue building Zappos independently with a long-term focus on culture and customer experience, board members were seeking a financial exit—whether through acquisition or IPO. Some board members dismissed Zappos' cultural initiatives as "Tony's social experiments," preferring to focus exclusively on e-commerce performance. This stalemate created a precarious situation. Though Hsieh controlled enough voting rights to prevent a forced sale, the board could theoretically replace him with a CEO focused solely on maximizing short-term profits. After considering various options, including buying out the board members for approximately $200 million, Hsieh and his team began exploring partnerships with potential investors. It was during this search that conversations with Amazon resurfaced. Though previous discussions in 2005 hadn't progressed, both companies now approached the relationship with new perspective. What made Amazon different from other potential partners was their willingness to allow Zappos to maintain its independence and distinct culture. Jeff Bezos and his team had been following Zappos' progress for years and recognized the value in their distinctive approach to business. During negotiations, Hsieh insisted on an all-stock transaction rather than a cash purchase, symbolizing a marriage rather than a sale. As he explained to employees: "While headlines may say 'Amazon acquires Zappos' or 'Zappos sells to Amazon,' they don't properly convey the spirit of the transaction. I personally would prefer the headline 'Zappos and Amazon sitting in a tree...'" The acquisition process culminated in July 2009 with Jeff Bezos visiting Hsieh's home in Las Vegas, where they barbecued burgers and discussed their shared vision. The deal valued Zappos at over $1.2 billion based on Amazon's stock price—a remarkable outcome for a company that had nearly gone bankrupt multiple times. When announced to employees, the news was met initially with shock, but quickly followed by enthusiasm as they understood the partnership's potential. The celebration included surprise Kindle gifts for every employee and a bonus from Amazon, resulting in a spontaneous standing ovation with many employees moved to tears. In his announcement email, Hsieh addressed the three burning questions he anticipated: job security, cultural preservation, and leadership continuity. He assured employees that Zappos would continue operating independently as a wholly-owned subsidiary with its existing leadership team. Amazon's interest stemmed precisely from respecting Zappos' unique culture and brand—they wanted to preserve rather than absorb it. As Hsieh explained: "This is about making the Zappos brand, culture, and business even stronger than it is today." This unusual acquisition model represented a marriage of complementary strengths—Zappos' high-touch customer service approach paired with Amazon's high-tech operational excellence. Rather than forcing cultural assimilation, as happens in most corporate mergers, Amazon recognized that preserving Zappos' distinctive identity was essential to its continued success. The transaction resolved the alignment problems with the board while providing Zappos access to Amazon's vast resources and expertise. For employees, it represented not an ending but an acceleration of their mission to deliver happiness to the world. The Amazon acquisition demonstrated an important evolution in corporate mergers—recognizing that preserving cultural assets can be as valuable as capturing market share or technology. It also illustrated how alignment among shareholders, leadership, and company purpose creates sustainable business success. What began as a potential threat to Zappos' culture ultimately became the vehicle for preserving and expanding it on a much larger scale.

Chapter 7: The Happiness Framework: Business as a Path to Joy

After the Amazon acquisition, Hsieh began synthesizing his business experiences and research on happiness into a coherent philosophy. He observed that while people naturally assume they know what will make them happy, scientific research often contradicts these intuitions. Just as proper marathon training requires counter-intuitive approaches (running slower to ultimately go faster), achieving lasting happiness often means pursuing strategies that might initially seem indirect. This insight led him to develop frameworks for understanding happiness that could be applied both personally and professionally. The first framework identified four essential components of happiness: perceived control, perceived progress, connectedness, and vision/meaning. At Zappos, these principles translated directly into business practices. They implemented a "skill sets" system giving call center representatives control over their advancement and pay increases. They restructured promotion schedules to provide more frequent, smaller advancements rather than occasional large jumps, creating ongoing perceived progress. The emphasis on building relationships among colleagues enhanced connectedness, while the company's evolving purpose—from selling shoes to delivering happiness—provided meaningful vision beyond profit alone. Drawing from psychologist Abraham Maslow's hierarchy of needs, Hsieh adapted Chip Conley's business application of these concepts into a second framework. For customers, Zappos progressed from meeting basic expectations (receiving correct items) to fulfilling desires (free shipping) to addressing unrecognized needs (surprise overnight shipping upgrades). For employees, they moved beyond monetary compensation to provide recognition and ultimately meaning. And for investors, they evolved from transactional relationships to alignment around shared values and legacy. This multi-layered approach ensured that all stakeholders experienced fulfillment at the highest levels. The third framework distinguished between three types of happiness: pleasure (short-term gratification), passion (engagement in flow activities), and higher purpose (contributing to something beyond oneself). Research indicated that while most people chase pleasure-based happiness, purpose-driven happiness creates the most lasting fulfillment. Hsieh observed that this pattern formed a "fractal"—the same pattern repeated at different scales. Just as individuals achieve sustainable happiness through purpose rather than mere pleasure, companies build enduring success through purpose rather than focusing exclusively on profits. This insight explained why purpose-driven organizations consistently outperformed their profit-obsessed counterparts over the long term. Through Zappos Insights and increased public speaking, Hsieh found himself part of a broader movement applying these happiness principles to business. Companies across industries began reimagining their cultures, customer experiences, and ultimate purposes after exposure to Zappos' approach. The success of these transformations confirmed that happiness wasn't just a feel-good initiative but a powerful business strategy driving measurable results. The movement grew organically as more organizations recognized that focusing on employee and customer happiness created stronger financial outcomes than pursuing profits directly. As Hsieh reflected on this evolution, he came to see his work not merely as building a successful company but as contributing to a happiness movement transforming business globally. By encouraging organizations to apply findings from positive psychology research, he envisioned creating compounding effects that would make the world measurably happier. The ultimate test he proposed for any action, personal or corporate, was simply: "What would happen if everyone in the world acted in the same way? What would the world look like? What would the net effect be on the overall happiness in the world?" This framework reframed business as a vehicle for human fulfillment rather than merely economic activity. By demonstrating that companies could simultaneously deliver happiness to customers, employees, vendors, shareholders, and communities, Zappos provided a powerful alternative to traditional profit-centered business models. The lasting legacy of Hsieh's approach was proving that happiness and success are not competing goals but rather complementary forces that, when properly aligned, create extraordinary outcomes for all involved.

Summary

Tony Hsieh's extraordinary journey reveals a profound truth: business success and human happiness are not opposing forces but complementary elements of the same pursuit. Through his evolution from profit-focused entrepreneur to purpose-driven leader, Hsieh demonstrated that companies thrive when they prioritize customer experience, employee fulfillment, and authentic values alongside financial performance. The Zappos experiment proved that seemingly impractical business decisions—spending hours on customer calls, offering free shipping both ways, maintaining inventory despite cash flow challenges—can transform into sustainable competitive advantages when they deliver genuine happiness. The most valuable lesson from Hsieh's story is the power of alignment—ensuring that personal values, company culture, and business objectives reinforce rather than undermine each other. When Zappos aligned its operations around core values and a higher purpose of "delivering happiness," the company unlocked performance that continually exceeded expectations. This principle extends beyond business to personal life, where aligning daily activities with deeper sources of meaning creates more sustainable fulfillment than chasing short-term pleasures. For entrepreneurs, executives, and individuals alike, Hsieh's legacy offers a compelling alternative to conventional wisdom: by focusing first on purpose and passion, then letting profits follow naturally, we create not just better businesses but better lives for ourselves and everyone we touch.

About Author

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Tony Hsieh

In 1999, at the age of twenty-four, Tony Hsieh (pronounced Shay) sold LinkExchange, the company he cofounded, to Microsoft for $265 million. He then joined Zappos as an adviser and investor, and eventually became CEO. He helped Zappos grow from almost nothing to over $1 billion in gross merchandise sales annually, while simultaneously making Fortune magazine’s annual “Best Places to Work For” list.

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