Review: Delivering Happiness, by Tony Hsieh

Delivering Happiness: A Path to Profits, Passion, and Purpose, by Tony Hsieh. New York: Business Plus, 2010. 253 pp. $23.99 (hardcover).

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In July of 2009, right after celebrating his company’s ten-year anniversary, Tony Hsieh stood in a packed room. Seven hundred Zappos employees were cheering, and a “lot of them even had tears of happiness streaming down their faces” (p. 1). Hsieh had just surprised his employees with a special bonus after announcing the sale of Zappos to Amazon for $1.2 billion. Amazingly, this was the second time in just over ten years that Hsieh had sold a company for what amounted to roughly $100 million for each year he ran the business. But this second sale was a far happier occasion.

In the autobiographical Delivering Happiness: A Path to Profits, Passion, and Purpose, Hsieh tells how he set out as a kid “to become the number one worm seller in the world,” ran a successful button business (among others) in elementary school, and eventually achieved happiness—while delivering it—through Zappos, an online shoe store.

Hsieh starts by recounting a childhood spent searching for different ways to make money, observing what worked, and gaining many important lessons about business—his goal being to make enough money to do whatever he wanted when he grew up.

Upon graduating from university, and after a short stint at Oracle, Hsieh put his mounting knowledge to use in a company called LinkExchange, which he started with a friend, Sanjay. “The idea behind LinkExchange,” says Hsieh, “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 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. (p. 38)

The value that LinkExchange offered to websites was immediately recognized, and the network grew at a breathtaking pace. Working around the clock, Hsieh and Sanjay answered e-mails and programmed. Only five months into the business, they were in a position to debate selling their company for $1 million—an offer they ultimately refused.

Four busy months and twenty-five new employees later, Jerry Yang—who had just taken Yahoo! public to much fanfare—offered to buy the company for $20 million. Again, Hsieh and Sanjay struggled with whether to sell. And again they refused. For his part, Hsieh wanted to make a lot more money selling advertising online—and he was having fun doing so at LinkExchange

Hsieh recounts some of the good-natured practical jokes the company played on employees—such as having new hires dress up for an “important business meeting” that was really just a fun get-together—and how happy everyone there was. But as the business quickly expanded, opening up new sales offices and hiring employees outside his circle of friends, Hsieh found it difficult even to distinguish those who worked at the company from those who did not. The friendly environment, where everyone knew and liked everyone, was gone. Worse, the playful office environment shifted to one of “politics, positioning, and rumors” (p. 48).

By the end of 1998, Hsieh and Sanjay had had enough and decided to sell the company to Microsoft for $265 million, allowing Hsieh to walk away with roughly $32 million—or $40 million if he stayed with the company another year. Hearing over lunch that the deal had finally closed, Hsieh and Sanjay walked back to the office in silence. Despite the huge payout, they liked neither their workplace environment nor their colleagues, and they both expected the upcoming twelve months with Microsoft to be drudgery.

According to Hsieh, his time at Microsoft was precisely what he expected. But he soon reconsidered his situation:

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. And yet here I was, wasting my time, wasting my life, so that I could make more money even though I had all the money I ever needed for the rest of my life. (p. 53)

At that moment, Hsieh decided to give up the roughly $8 million dollars included in the deal for staying at Microsoft. He wanted to leave and find something he was passionate about doing. He wanted to be happy.

Hsieh recalls the next year or so during which he tried investing, playing poker, and throwing parties in a huge, newly purchased loft. However, although he learned important things during this period—such as how much he loved creating positive and memorable experiences for others—Hsieh had yet to find anything that kept his interest or made him happy over the long term. According to Hsieh, he started to have feelings of self-doubt. “I wondered whether I had just gotten lucky with LinkExchange. Was I just a dot-com lottery winner who happened to be at the right place and the right time?” (p. 89).

In early 2000, Hsieh was not the only one asking such questions. Dot-com stocks were being slaughtered every day in the stock market, and most of Hsieh’s early stage investments, unable to raise additional funds, went bankrupt. One remained, however—Zappos.

Hsieh recounts how he took off his investor hat and took over Zappos, an experience much different from that at LinkExchange:

The next two years were stressful at Zappos. We were just focused on survival. We had no choice but to succeed. We went through a recession, the dot-com stock market crash, and 9/11. At every turn, it felt like the universe was testing our commitment and our passion. (p. 93)

Hsieh started taking money from his personal bank account, seeing what he could sell to raise even more cash, and putting what he could into the company. Whereas others at the company took cuts in pay or worked for equity in the company, Hsieh worked for $24 a year.

According to Hsieh, however, these hard times were ultimately beneficial “as [they] forced [Zappos] to focus more on delivering better customer service” (p. 98). This led them to provide a larger selection of shoes, to “wow” their customers with faster shipping, to ensure passionate employees (in part by offering trainees $2,000 to quit, thereby weeding out those who did not love the job), and to invest advertising dollars in creating a memorable experience for—and thus making marketers out of—their customers.

Of course, Zappos did not become a billion-dollar company the moment they started delivering great customer service. But as Hsieh focused on creating a culture that was passionate about “wowing” customers and as a positive view of Zappos spread from person to person, the flirtations with bankruptcy became rarer and sales steadily advanced.

While telling the Zappos story, Hsieh shares what he was thinking at each stage. He includes e-mails he sent and received along with snippets from employees regarding how they created a “culture book,” how they set up relationships with vendors, how they recruited new workers, and how they pursued growth and learning within the company. The highlight of such inclusions is the transcript of a live chat with a demanding customer, which is as hilarious as it is instructive. All of these inclusions serve to demonstrate how Hsieh and his colleagues worked to deliver happiness, and how in doing so Hsieh found his own.

By the end of the book, readers will be familiar with Hsieh’s own path to profits, passion, and purpose. Moreover, they are likely to be inspired to pursue these three values for themselves. In this sense especially Delivering Happiness delivers.