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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. T o 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 m ore 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 wer e 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 himsel f 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 Za ppos.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 fr iendly 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 th ere 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?