3 read and answer the questions

Work With Friends: Tony Hsieh and Zappos.com

In Delivering Happiness: A Path to Profits, Passion, and Purpose, Tony Hsieh

(2010) shows us how to make friends and succeed in business. And how does Tony

define success? Not by the money he’s made by selling Zappos.com for $1.2 billion to

Amazon.com. Instead, Tony has always defined success and happiness in terms of his

friendships and the life experiences he’s had. To a cynic, this may sound like a

meaningless PR statement. But time and time again, Tony gave up money to pursue his

work interests and work with his friends. And Tony’s willingness to put people and

experiences first – over money – is what ultimately led to the biggest financial returns for

him and his friends.

Tony and his good friend, Sanjay, thought they had hit the jackpot when they

graduated from Harvard with great job offers from Oracle: At $40,000 a year (good

money in 1995), they would be making more than their other friends from Harvard. But

soon, Tony found that his job – running routine statistical tests – was pretty boring.

Moreover, no one seemed to even know who he was or care. He felt isolated. Sanjay was

bored as well. So they started their own business – doing web design – on the side just to

keep from getting bored. After a few months, they had some paying clients, but their

income from web designing was still far less than they made at Oracle. Nevertheless,

Tony and Sanjay decided to quit Oracle (a nerve-racking decision for Tony) and devote

their time to their web design business.

Tony and Sanjay came up with the idea for LinkExchange, and in a couple of

days, they developed a test program. LinkExchange allowed websites to advertise on

other participating websites for free: If a website showed a thousand banner ads, they

would get 500 free ads posted on other sites, and LinkExchange would be able to sell the

remaining 500 slots to advertisers. The site grew rapidly, and they were offered a million

dollars for the site after only 5 months. People interested primarily in money might have

taken the easy cash, but Tony and Sanjay enjoyed what they were doing and turned down

the offer. A few friends who had stopped by to visit began working with them on

LinkExchange. Soon, 25 people, mostly friends, were working with them. Not long after,

Yahoo’s founder, Jerry Wang, offered them $20 million, but Tony and Sanjay were still

having fun working together and running the site. Why sell when they were having a

great time? They turned Jerry down but accepter $3 million from another investor) for a

20% stake) so they could grow the business. Tony didn’t mind working long hours

because he was working with his friends.

Eventually, Tony ran out of friends to hire, and he had to hire strangers.

LinkExchange grew to about 100 employees. The new employees were smart but

connived and bickered over stock options and money. The friendly atmosphere was gone,

and Tony knew it was time to sell when he found himself repeatedly hitting the snooze

button in the morning. Microsoft bought LinkExchange for $265 million, with Tony’s

share being $32 million plus another $8 million, he found that the excitement was gone –

what he wanted was some new experiences – and he gave up the extra cash. Tony

realized that the happiest times in his life involved being creative and connecting with

others – making money wasn’t the key.

Tony and some of his friends became venture capitalists (fund name: Venture

Frogs) so they could help other people make their own dreams come true. They funded

20 entrepreneurial plans, most of which went bankrupt or were barely profitable. But one

of the businesses was Zappos.com. Tony invested in Zappos.com because he liked the

passion and excitement that Nick Swinmurn had for the idea of selling shoes over the

Internet. Tony began investing more and more of his own money in Zappos and began to

take on more of the hands-on leadership responsibilities. His advisors urged him to limit

his investments in Zappos.com, but Tony risked his own financial future because he felt

committed to the people he knew at Zappos.com. Tony had to sell a loft he used for

parties (a 40% loss over his purchase price) to help Zappos.com survive. Tony believed

in Nick, Fred, and the many other people he had gotten to know at Zappos.com. After 10

years of struggle, Zappos.com finally became big enough to be profitable.

Zappos.com became profitable because Tony learned his lessons from

LinkExchange about the importance of friendly interpersonal exchanges at work.

Zappos.com became one of Fortune’s 100 Best Places to Work For because tony

encouraged everyone to know each other and to form friends at work. When employees

logged on, they would be shown pictures of other employees and asked their names and

some questions about them. Zappos.com had a long list of parties and social activities

that employees could participate in. To weed out new recruits only interested in money,

Zappos.com offered new employees $2,000 if they decided to quit within the first few

weeks – few accepted the offer. Zappos.com’s turnover was unusually low because

people didn’t want to leave their coworkers – people who were like family to them. Also,

Zappos.com didn’t offshore its call center. Tony knew that friendly customer service was

actually Zappos’s core competency. Highly satisfied call center employees were able to

provide friendly service to customer and boost sales through word-of-mouth

recommendations and repeat business. When you’re happy and enjoy your job, you don’t

have to fake being cheerful to customers.

1. Is it important to work with friends? Why or why not?

2. Are groups more productive when everyone is friends? Is there a downside to working

with friends?

3. Tony proved his commitment to LinkExchange and Zappos by investing his own

money and by working hard – do you think his commitment spurred others to be equally

committed?

4. How could having parties and working with friends make call center employees better

at providing customer service?