from the world's big
Strong Culture Plus Higher Purpose Equals Profit
Question: Why do you link happiness with business?
Tony Hsieh: Yeah, well so I guess maybe it would be helpful to backtrack a little bit. Prior to Zappos I had cofounded a company called Link Exchange. This was back in 1996, during the first dotcom boom. And a college roommate and I started it out of our living room and grew it to about 100 or so people and ended up selling the company to Microsoft 2 1/2 years later, in 1998. But what a lot of people don’t know or realize is the reason why we ended up selling the company and it’s because the culture just went completely downhill, and I remember when it was just 5 or 10 of us it was a lot of fun, kind of your typical dotcom, working around the clock, sleeping under our desk, had no idea what day of the week it was and as we grew we started hiring our friends and I remember there was one friend of mine that was on a cross-country road trip and he stopped and we needed help and he actually never made his way back home.
And that worked great until we got to about 15 or 20 people and then we ran out of friends to hire and so we then started hiring people that had all the right skill sets and experiences, but weren’t necessarily great for the company culture. And we just didn’t know any better to pay attention to culture. And by the time we got to 100 people I myself dreaded getting out of bed in the morning to go to the office, and that was kind of a strange feeling because this was a company I had co-founded and so that is what led us to sell the company and then afterward both my co-founder and I we left the company, left Microsoft shortly thereafter.
So as I started getting involved with Zappos, originally my role was just as an investor, an adviser. I was also doing that with a bunch of other companies. I realized within a year that for me Zappos was pretty... Sorry, investing was pretty boring and I really missed being part of building something. I felt like I was always standing on the sidelines, so Zappos... really liked the people there and got involved full-time and I’ve been full-time ever since.
And for me the initial motivation was really what would make me happy. And I wanted to... you know if I was going to go into an office I wanted it to be with people I would choose to be around even if we didn’t have to work together and so that was one of the major reasons why I decided out of all the different companies we invested in to work with Zappos. But over time it has kind of evolved where originally Zappos was all about just selling shoes online and we decided to focus on customer service, which is all about making customers happy and then over time we put more and more emphasis on company culture, which is all about making employees happy and so kind of took a step back and realized we’re basically trying to make customers happy, make employees happy and also make our vendors and business partners happy, so let’s kind of take a step back and just be about delivering happiness, hence, the title of the book.
Question: Does wealth lead to happiness?
Tony Hsieh: Yeah, well what is interesting is they’ve actually... So when I was thinking to that that was prior to really a lot of this research behind the signs of happiness that happened and what they’ve found through the research is basically money is... If you’re worried about putting food on the table or putting a roof over your head, that stress is definitely will contribute to unhappiness, but once you have your basic needs met then incremental money and in fact I think there was an article that came out a couple of weeks ago where they said any... what they found is anything above I think the number was $75,000 a year in terms of income actually when they studied the happiness level of people that were making more money they actually were less happy because they were… for whatever reason they were stressed about all the additional things that come with it and then other studies have also shown that people are... the happiness is much longer if you’re buying experiences versus things. And so I guess I think kind of the default assumption that I had and that our society in general has is more money equals more happiness and all the research has shown that that’s true up to a point, up until you can get your basic needs met, but then really there is other stuff that has a much bigger impact on your happiness besides just money.
Question: What are the three kinds of happiness?
Tony Hsieh: Well so the three types of happiness that you just stated, pleasure, passion and purpose are really just come out of the whole research that has been done on the signs of happiness and I think both for myself and probably for most people our kind of default is to kind of try to chase after the pleasure type of happiness where what the research has shown it’s great if you can sustain it. The problem is it’s very hard to sustain unless you’re basically a rock star and so that’s why I refer to it as the rock star type happiness and what the research has shown is out of those three types it’s the shortest lasting type of happiness. Basically as soon as the source of stimuli goes away your happiness just plummets and drops right down to where it was before.
But I think a lot of people including myself back then were trying to chase that, sustain that and then with the thought of if I ever... you know once that’s sustained on an ongoing basis, which the research has shown is next to impossible, then I’ll worry about the passion part of it and then if I ever get around to it I’ll worry about the higher purpose part of it because that feels like more kind of philanthropic or charity type of angle. But based on the research data that third type, the higher purpose type is actually the longest lasting type of happiness. So the proper strategy should actually be to figure out that first and then layer on top of that the passion type of happiness and then anytime you experience the pleasure type it’s just kind of icing on the cake. And it’s definitely counter-intuitive and even if you take out the kind of, I don’t know what you’d call it, like philanthropic side of being part of something... Like even if you approach it from a purely selfish perspective in trying the maximize your own selfish happiness that actually is kind of ironically the best strategy for doing so.
Question: How did your higher-purpose mindset evolve?
Tony Hsieh: We definitely did not start out with you know "higher purpose," and what is interesting is now we have books in our library. When you come visit our offices you’ll see we’ve got 30 or 40 titles in our library out in the reception area and we give those books freely out to visitors and employees, but two of the books that not only do we give out, but we teach classes on to our own employees are "Good to Great" by Jim Collins and "Tribal Leadership." And we actually partnered with the authors of "Tribal Leadership" so you can download the audio version for free from the Zappos Web site, but and I wish I had read both of these books prior to Zappos, but basically the authors researched and looked at what separated the great companies in terms of long-term financial performance from just the good ones or the mediocre ones and they were actually surprised by their findings.
They found that there were two important ingredients that the great companies had. One was the great companies all had very strong cultures and the second one is actually kind of surprising is the great companies all had a higher purpose that wasn’t just about being number one in market or profits or making money and ironically by having that higher purpose it actually enabled those companies to make more profits in the long run. And so the subtitle of my book is "A Path to Profits, Passion and Purpose" because for businesses you need all three of those in order to continue to grow the brand and the business and I think too many companies in corporate America focus on just the profits, which if they forget about the passion and purpose part of it, it actually ends up hurting their long term profits for the company. And so for us we kind of accidently stumbled onto this because I hadn’t read the book. I don’t even know if the books existed at this time.
And so in 1999 when Zappos started it was all about let’s just build the brand to be about shoes, selection. We’re just going to be the market leader in shoes. And then about four years into it, in 2003, we all kind of sat around and asked ourselves what do we want to be when we grow up. Do we want to be about shoes or something more meaningful? And actually, at the time the main motivation was we just don’t want to be pigeonholed into just shoes and so then we decided "Okay, let’s build our brand to be about the very best customer service and customer experience and with the philosophy of we’ll invest... take most of the money we would have spent in paid marketing and paid advertising, invest it into the customer experience and let our customers do the marketing for us through word of mouth."
So, and a funny thing happened when we actually communicated this to our employees. We found that suddenly employees were a lot more passionate about the company, a lot more engaged. And when customers called they could sense the person on the other end of the phone wasn’t there just for a paycheck, but really wanted to provide great service. And when vendors came into our offices of visited us they wanted to stay longer and visit more frequently, so all of these things had this kind of multiplicative snowball effect that really drove our growth a lot over the years and it wasn’t something that we expected. It is something that we just kind of accidently stumbled into. And then a couple of years after that we decided okay, let’s build the... Company culture had always been important because I didn’t want to repeat the same mistake I had made at my previous company, but instead of just saying it’s a priority let’s actually make it the number one priority of the company, with the belief that if we get the culture right then most of the other stuff—like delivering great customer service or building a long term enduring brand or business—will happen just naturally on its own and so over time it has kind of expanded from just shoes to customer service to culture and then now realizing the thing that ties all that together is delivering happiness.
And it’s really interesting because once we came up with "Okay, it’s going to be delivering happiness," and this was in 2009 then that opened up a whole new world of possibilities for us and so now we had this program called Zappos Insights. It’s actually its own separate Web site and entity within the Zappos family and so if you go to ZapposInsights.com there is anything from a monthly video subscription service to one-day and two-day seminars that we actually host here in Vegas and people from all over the world fly in and we help them figure out how to create their own strong cultures.
And it has been really neat because we’ve seen... Well first of all, it’s just neat because it’s its own separate business. It has nothing to do with selling shoes online, but it’s also really neat because this whole idea of happiness as a business model we’re now spreading beyond just to Zappos employees and Zappos customers. We’re helping other companies go make their customers happier, make their employees happier and there is this one company, called the Atlanta Refrigeration Company, they do repairs out in the field. And afterward they did this thing that went through "we can focus on making customers happier," focus on culture to make employees happy and they’re reporting that in a down economy the revenues are up. They’re profits are up and they even sent us before and after pictures of their offices to show the change in culture and so it’s just really neat seeing this idea of happiness as a business model working in other companies and other industries. It’s not just a Zappos thing and it’s not just an internet thing.
Recorded September 24th, 2010
Interviewed by Peter Hopkins
Too many companies only focus on the bottom line. When a company forgets about passion, purpose and happiness, it actually ends up hurting long-term profitability.
Higher education faces challenges that are unlike any other industry. What path will ASU, and universities like ASU, take in a post-COVID world?
- Everywhere you turn, the idea that coronavirus has brought on a "new normal" is present and true. But for higher education, COVID-19 exposes a long list of pernicious old problems more than it presents new problems.
- It was widely known, yet ignored, that digital instruction must be embraced. When combined with traditional, in-person teaching, it can enhance student learning outcomes at scale.
- COVID-19 has forced institutions to understand that far too many higher education outcomes are determined by a student's family income, and in the context of COVID-19 this means that lower-income students, first-generation students and students of color will be disproportionately afflicted.
What conditions of the new normal were already appreciated widely?<p>First, we understand that higher education is unique among industries. Some industries are governed by markets. Others are run by governments. Most operate under the influence of both markets and governments. And then there's higher education. Higher education as an "industry" involves public, private, and for-profit universities operating at small, medium, large, and now massive scales. Some higher education industry actors are intense specialists; others are adept generalists. Some are fantastically wealthy; others are tragically poor. Some are embedded in large cities; others are carefully situated near farms and frontiers.</p> <p>These differences demonstrate just some of the complexities that shape higher education. Still, we understand that change in the industry is underway, and we must be active in directing it. Yet because of higher education's unique (and sometimes vexing) operational and structural conditions, many of the lessons from change management and the science of industrial transformation are only applicable in limited or highly modified ways. For evidence of this, one can look at various perspectives, including those that we have offered, on such topics as <a href="https://www.insidehighered.com/digital-learning/blogs/rethinking-higher-education/lessons-disruption" target="_blank">disruption</a>, <a href="https://www.nytimes.com/2020/02/20/education/learning/education-technology.html" target="_blank">technology management</a>, and so-called "<a href="https://www.insidehighered.com/sites/default/server_files/media/Excerpt_IHESpecialReport_Growing-Role-of-Mergers-in-Higher-Ed.pdf" target="_blank">mergers and acquisitions</a>" in higher education. In each of these spaces, the "market forces" and "market rules" for higher education are different than they are in business, or even in government. This has always been the case and it is made more obvious by COVID-19.</p> <p>Second, with so much excitement about innovation in higher education, we sometimes lose sight of the fact that students are—and should remain—the core cause for innovation. Higher education's capacity to absorb new ideas is strong. But the ideas that endure are those designed to benefit students, and therefore society. This is important to remember because not all innovations are designed with students in mind. The recent history of innovation in higher education includes several cautionary tales of what can happen when institutional interests—or worse, <a href="https://www.insidehighered.com/news/2016/02/09/apollos-new-owners-seek-fresh-start-beleaguered-company" target="_blank">shareholder</a> interests—are placed above student well-being.</p>
Photo: Getty Images<p>Third, it is abundantly apparent that universities must leverage technology to increase educational quality and access. The rapid shift to delivering an education that complies with social distancing guidelines speaks volumes about the adaptability of higher education institutions, but this transition has also posed unique difficulties for colleges and universities that had been slow to adopt digital education. The last decade has shown that online education, implemented effectively, can meet or even surpass the quality of in-person <a href="https://link-springer-com.ezproxy1.lib.asu.edu/article/10.1007/s10639-019-10027-z" target="_blank">instruction</a>.</p><p>Digital instruction, broadly defined, leverages online capabilities and integrates adaptive learning methodologies, predictive analytics, and innovations in instructional design to enable increased student engagement, personalized learning experiences, and improved learning outcomes. The ability of these technologies to transcend geographic barriers and to shrink the marginal cost of educating additional students makes them essential for delivering education at scale.</p><p>As a bonus, and it is no small thing given that they are the core cause for innovation, students embrace and enjoy digital instruction. It is their preference to learn in a format that leverages technology. This should not be a surprise; it is now how we live in all facets of life.</p><p>Still, we have only barely begun to conceive of the impact digital education will have. For example, emerging virtual and augmented reality technologies that facilitate interactive, hands-on learning will transform the way that learners acquire and apply new knowledge. Technology-enabled learning cannot replace the traditional college experience or ensure the survival of any specific college, but it can enhance student learning outcomes at scale. This has always been the case, and it is made more obvious by COVID-19.</p>
What conditions of the new normal were emerging suspicions?<p>Our collective thinking about the role of institutional or university-to-university collaboration and networking has benefitted from a new clarity in light of COVID-19. We now recognize more than ever that colleges and universities must work together to ensure that the American higher education system is resilient and sufficiently robust to meet the needs of students and their families.</p> <p>In recent weeks, various commentators have suggested that higher education will face a wave of institutional <a href="https://www.businessinsider.com/scott-galloway-predicts-colleges-will-close-due-to-pandemic-2020-5" target="_blank">closures</a> and consolidations and that large institutions with significant online instruction capacity will become dominant.</p> <p>While ASU is the largest public university in the United States by enrollment and among the most well-equipped in online education, we strongly oppose "let them fail" mindsets. The strength of American higher education relies on its institutional diversity, and on the ability of colleges and universities to meet the needs of their local communities and educate local students. The needs of learners are highly individualized, demanding a wide range of options to accommodate the aspirations and learning styles of every kind of student. Education will become less relevant and meaningful to students, and less responsive to local needs, if institutions of higher learning are allowed to fail. </p> <p>Preventing this outcome demands that colleges and universities work together to establish greater capacity for remote, distributed education. This will help institutions with fewer resources adapt to our new normal and continue to fulfill their mission of serving students, their families, and their communities. Many had suspected that collaboration and networking were preferable over letting vulnerable colleges fail. COVID-19's new normal seems to be confirming this.</p>
President Barack Obama delivers the commencement address during the Arizona State University graduation ceremony at Sun Devil Stadium May 13, 2009 in Tempe, Arizona. Over 65,000 people attended the graduation.
Photo by Joshua Lott/Getty Images<p>A second condition of the new normal that many had suspected to be true in recent years is the limited role that any one university or type of university can play as an exemplar to universities more broadly. For decades, the evolution of higher education has been shaped by the widespread imitation of a small number of elite universities. Most public research universities could benefit from replicating Berkeley or Michigan. Most small private colleges did well by replicating Williams or Swarthmore. And all universities paid close attention to Harvard, Princeton, MIT, Stanford, and Yale. It is not an exaggeration to say that the logic of replication has guided the evolution of higher education for centuries, both in the US and abroad.</p><p>Only recently have we been able to move beyond replication to new strategies of change, and COVID-19 has confirmed the legitimacy of doing so. For example, cases such as <a href="https://www.washingtonpost.com/education/2020/03/10/harvard-moves-classes-online-advises-students-stay-home-after-spring-break-response-covid-19/" target="_blank">Harvard's</a> eviction of students over the course of less than one week or <a href="https://www.nhregister.com/news/coronavirus/article/Mayor-New-Haven-asks-for-coronavirus-help-Yale-15162606.php" target="_blank">Yale's apparent reluctance</a> to work with the city of New Haven, highlight that even higher education's legacy gold standards have limits and weaknesses. We are hopeful that the new normal will include a more active and earnest recognition that we need many types of universities. We think the new normal invites us to rethink the very nature of "gold standards" for higher education.</p>
A graduate student protests MIT's rejection of some evacuation exemption requests.
Photo: Maddie Meyer/Getty Images<p>Finally, and perhaps most importantly, we had started to suspect and now understand that America's colleges and universities are among the many institutions of democracy and civil society that are, by their very design, incapable of being sufficiently responsive to the full spectrum of modern challenges and opportunities they face. Far too many higher education outcomes are determined by a student's family income, and in the context of COVID-19 this means that lower-income students, first-generation students and students of color will be disproportionately afflicted. And without new designs, we can expect postsecondary success for these same students to be as elusive in the new normal, as it was in the <a href="http://pellinstitute.org/indicators/reports_2019.shtml" target="_blank">old normal</a>. This is not just because some universities fail to sufficiently recognize and engage the promise of diversity, this is because few universities have been designed from the outset to effectively serve the unique needs of lower-income students, first-generation students and students of color.</p>
Where can the new normal take us?<p>As colleges and universities face the difficult realities of adapting to COVID-19, they also face an opportunity to rethink their operations and designs in order to respond to social needs with greater agility, adopt technology that enables education to be delivered at scale, and collaborate with each other in order to maintain the dynamism and resilience of the American higher education system.</p> <p>COVID-19 raises questions about the relevance, the quality, and the accessibility of higher education—and these are the same challenges higher education has been grappling with for years. </p> <p>ASU has been able to rapidly adapt to the present circumstances because we have spent nearly two decades not just anticipating but <em>driving</em> innovation in higher education. We have adopted a <a href="https://www.asu.edu/about/charter-mission-and-values" target="_blank">charter</a> that formalizes our definition of success in terms of "who we include and how they succeed" rather than "<a href="https://www.washingtonpost.com/opinions/2019/10/17/forget-varsity-blues-madness-lets-talk-about-students-who-cant-afford-college/" target="_blank">who we exclude</a>." We adopted an entrepreneurial <a href="https://president.asu.edu/read/higher-logic" target="_blank">operating model</a> that moves at the speed of technological and social change. We have launched initiatives such as <a href="https://www.instride.com/how-it-works/" target="_blank">InStride</a>, a platform for delivering continuing education to learners already in the workforce. We developed our own robust technological capabilities in ASU <a href="https://edplus.asu.edu/" target="_blank">EdPlus</a>, a hub for research and development in digital learning that, even before the current crisis, allowed us to serve more than 45,000 fully online students. We have also created partnerships with other forward-thinking institutions in order to mutually strengthen our capabilities for educational accessibility and quality; this includes our role in co-founding the <a href="https://theuia.org/" target="_blank">University Innovation Alliance</a>, a consortium of 11 public research universities that share data and resources to serve students at scale. </p> <p>For ASU, and universities like ASU, the "new normal" of a post-COVID world looks surprisingly like the world we already knew was necessary. Our record breaking summer 2020 <a href="https://asunow.asu.edu/20200519-sun-devil-life-summer-enrollment-sets-asu-record" target="_blank">enrollment</a> speaks to this. What COVID demonstrates is that we were already headed in the right direction and necessitates that we continue forward with new intensity and, we hope, with more partners. In fact, rather than "new normal" we might just say, it's "go time." </p>
The coronavirus pandemic has brought out the perception of selfishness among many.
- Selfish behavior has been analyzed by philosophers and psychologists for centuries.
- New research shows people may be wired for altruistic behavior and get more benefits from it.
- Crisis times tend to increase self-centered acts.
Paul Krugman on the Virtues of Selfishness<div class="rm-shortcode" data-media_id="7ZtAkm6C" data-player_id="FvQKszTI" data-rm-shortcode-id="828936bf6953080e9018307354c0c02b"> <div id="botr_7ZtAkm6C_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/7ZtAkm6C-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/7ZtAkm6C-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/7ZtAkm6C-FvQKszTI.js"></script> </div> The Nobel Prize-winning economist on the virtues of selfishness.
Evolution Is Moving Us Away from Selfishness. But Where Is It Taking ...<div class="rm-shortcode" data-media_id="cyeqmYCb" data-player_id="FvQKszTI" data-rm-shortcode-id="6c5efecb56456e9acc25cf36935b1826"> <div id="botr_cyeqmYCb_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/cyeqmYCb-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/cyeqmYCb-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/cyeqmYCb-FvQKszTI.js"></script> </div>
Exploring Morality and Selfishness in Modern Times<div class="rm-shortcode" data-media_id="02eX1Cag" data-player_id="FvQKszTI" data-rm-shortcode-id="45cc6180db791f32683988fb52faff26"> <div id="botr_02eX1Cag_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/02eX1Cag-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/02eX1Cag-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/02eX1Cag-FvQKszTI.js"></script> </div> Philosopher Peter Singer discusses the state of global ethics.
Parenting could be a distraction from what mattered most to him: his writing.
Ernest Hemingway was affectionately called “Papa," but what kind of dad was he?
Scientists uncovered the secrets of what drove some of the world's last remaining woolly mammoths to extinction.
Every summer, children on the Alaskan island of St Paul cool down in Lake Hill, a crater lake in an extinct volcano – unaware of the mysteries that lie beneath.
Hollywood has created an idea of aliens that doesn't match the science.
- Ask someone what they think aliens look like and you'll probably get a description heavily informed by films and pop culture. The existence of life beyond our planet has yet to be confirmed, but there are clues as to the biology of extraterrestrials in science.
- "Don't give them claws," says biologist E.O. Wilson. "Claws are for carnivores and you've got to be an omnivore to be an E.T. There just isn't enough energy available in the next trophic level down to maintain big populations and stable populations that can evolve civilization."
- In this compilation, Wilson, theoretical physicist Michio Kaku, Bill Nye, and evolutionary biologist Jonathan B. Losos explain why aliens don't look like us and why Hollywood depictions are mostly inaccurate.