PandoMonthly: Fireside Chat With Zappos CEO Tony Hsieh

[Music] you know I've long said that you're maybe not the I mean look you're not a product guy you're not a coder you know you're not the typical Silicon Valley founder in fact you weren't even the founder of Zappos but I think what's totally unique about you is I've never met a CEO who hacks the way businesses are formed the way that you do and in your book you talk about the pattern of that so like your business that you did when you were young was this worm farm where you felt like if you could cut worms in half and they still would have a life so like hey you could double your product right there and the plan was to sell worms to kids is that a boy thing no actually I think I was gonna sell them to the fishermen that presumably adults that makes more sense but I turned out I I thought I think a lot of people think if you cut a worm in half that you get two worms but I didn't know one of them dies but so you just get a smaller worm and then according to your book you you left the lid off and so all of your inventory crawled away yeah so first business of failure after that there's a story they tell it to anyone who tours Zappos about the pizza business and how Alfred who would wind up being your CFO was taking your pizzas and selling them slice by slice for profit it's interesting that you're sort of always that guy who's looking for like these different angles of either putting things together in a different way or finding these sort of clever hacks in order to take something and make it be worth more as your mind just always work that way I think I mean growing up I had kind of your typical Asian American parents and you know they wanted me to go learn a variety of musical instruments getting a good school and in order to get in a good school the reason for that was to get into the grad school and and so on and for me I think the whole idea of just having my whole life you know charged out for me just never sat well with me and so this whole entrepreneurship thing was I guess kind of my way of rebelling against parents and growing up I when my favorite TV shows growing up was actually MacGyver and I really like the show because he never had exactly what he needed and whatever situation but you knew that by the end of the hour he would somehow put together duct tape and some toothpicks that string and then make a sailboat and state himself and save the world and so for me I guess that's what I've always loved about entrepreneurship it's like basically getting to play MacGyver but for business and you never know exactly how things will turn out but there's also this combination of creativity and optimism and and faith that it will mm-hmm you also seem to take a lot of joy and like putting people in uncomfortable situations which is funny because you seem like this very shy nice guy when we were backstage just now you were talking about how as a kid you would use 3-way calling to call two of your friends but you'd be quiet and they think each other had called them and you just listen to this awkwardness of them trying to be polite and not say why did you call me yeah this was back when call-waiting was this was pre cell phones I think if we were in like fifth grade or something and and so yeah my friend and I would call two of our other friends that knew each other put them on a three-way call which was 3-way calling wasn't known back then and then it would just be this weird conversation where they'd be like hello and then the other person would say hello and then like you know neither of them would it would take them like five or six minutes to figure out that actually neither of them had called each other and it was just I know I thought it was funny at the time now I mean this is a pattern of how you act when I wrote a story for TechCrunch breaking down how much you'd made from the Zappos sale you decided to get me back by changing all of your sort of bounce back and everything to anyone who is calling you about wealth management or investments to tell them I was managing your money and giving out my information I forget the exact context but somehow I think in your story you told people to contact me so I I think I just said you would you know figure out the top three and then and not only that you said you know you can email her but she really prefers phone calls and in person we both thought it was funny it gave me an appreciation for what happens in someone sells a company without the money just the headache now there's a story in your book that also reminded me of this pattern of yours which is when you introduce Mike Moritz to your your employees at link exchange when he had first invested in the company and knowing Mike more it's this story is hilarious can you tell that yes so this was back at my presuppose that company called link exchange we did online cooperative advertising back in 96 and I think we got funded in 97 by Sequoia and so we and and actually we did we were the culture of link exchange was we were always doing practical jokes and initiations and so on and so for all the new employees for example we we tell them that ozone so important investor was coming and so dressed up in a suit and tie and then the next day all the new employees would be the only ones dressed up in a suit and tie before the and and so Mike Morris actually came during the first meeting after after he invested and we in our initiation to that time was to have everyone do the Macarena and by then it was too late for Mike Martz to say no and so he actually ended up doing the Macarena so you put him up there you did not tell all the was ever happy know what was gonna happen as one of those last-minute so and this is very much what you're doing now in Vegas I mean you know throughout your book like at the time when you guys started venture frogs you had sort of a party loft and this different kind of co-op you obviously we're starting businesses living on a college campus you've described to me what you hope to do in Vegas it's kind of build an adult living you know college campus I mean what is it about that sort of sense of almost suspended you know adolescents and frivolity and having your best friend next door that appeals to you so much I guess it's it's not so much that we want to build an adult version of college it's more that College was the last time at least in my in my life and I think in a lot of people's lives where when you just go a walk outside it's normal to run into just random people you know and that kind of a sense of community and familiarity is something that that we see happening in downtown Vegas and it's pretty exciting because even though I've lived in the Vegas area for I think eight and a half years now most of that I just moved downtown a year-and-a-half ago most of that was in the suburbs and that's where most people in the biggest area live and the experience would be after after you're back home you're kind of just in your little sub suburban home and you know one knows their neighbors and you might go to the supermarket and once a month you might run into someone you know in out of context in the supermarket which is always a weird feeling because you say hi you're not expecting to see them there you say bye and then you see some two aisles later and you say hi and then you're just kind of awkwardly saying hi and bye and then ignoring them you're parked next to each other right and so on so that's just weird and uncomfortable and so what's been really cool about downtown Vegas and this actually actually all this was happening pre Zappos announcing that we were moving into the City Hall which is in downtown there's this whole area of Vegas that most tourists don't know about this most tourists think either the strip which actually technically isn't even in the city of Las Vegas or if they know anything about downtown is the old casinos and so on well on the east side of Las Vegas Boulevard there's this area called free money's where if you went there it's it's almost like the anti strip you there's if you go into any bars or coffee shops there you'd have no idea you're in Vegas there's Gaming and there's a it's actually one of the most community focused places I've ever lived and so a bunch of us myself included had already started hanging out there and this was all before the announcement that we were taking over Las Vegas City Hall and the city literally just moved out a few months ago to a new City Hall mm-hmm well before we get more into the Vegas experience let's sort of go back to the the early days so you mentioned this this appeal of entrepreneurship as a way of rebelling but you described in your book you know you're basically testing software at Oracle and you know you sort of awkwardly had to get up your nerve to go quit three times to you know jump off the cliff and work full time around link exchange which you were already building I mean link exchange is already doing well you know you're in the valley you know in what's beginning to be one of the best periods of entrepreneurship and you weren't particularly fulfilled at your job at Oracle what was it about taking that step that was so scary one is that link exchange actually didn't exist even as an idea at the time we were we were actually just oh right it was the it was just web design in basically we were creating websites for the San Mateo Chamber of Commerce and the Hillsdale mall and I think we had one of their clients and so it was really we I mean more or less we didn't have a plan but my roommates Sunday and I just both knew that we didn't want to work at Oracle anymore we'd only been there five months and so so I think that was the scary part that we really had no plan and and so we we quit and then it was really out of boredom after a while that came up with the idea of link exchange and initially there's almost more something to fill out of time and then you know over time it became we got lucky and found that it was you know actually could scale and turn into real business so tell people a little bit about what it was and a little bit about the journey you know within five I think a couple months you got your first acquisition offer which was a million dollars you countered with two and the guy said no five months later Jerry Yang offered you twenty million from Yahoo and you know you wound up selling it two years after that for two sixty-five million to Microsoft so it was quite a first act yet there were just a lot of you know ups and downs along the way and and I think you know we just got lucky with the timing was during that time when we ended up selling the company and ninety eight and and and so hard from a financial point of view I think we got lucky with the timing from why did we sell it point of view it actually was less about the money and more about the culture of the company I remember when it was early on it was five or ten of us we were kind of your typical calm we were working around the clock sleeping under a desk had no idea what day of the week it was and it was super exciting as we started growing and we started hiring friends and friends of friends and this whole strategy of hiring friends and friends of friends actually worked really well for us until we got to about 20 or so people and then we ran into a major problem and the problem was we basically ran out of friends and so I thought you were gonna say maybe your friends weren't the most qualified well I mean a lot of the job was actually not that difficult because we had to I remember we hired our apartment manager Ashley and his job was to because we had all these websites applying to be part of the network but we had to screen them and his job was basically to see which one's had pornography on them and so his job was to serve but would like that job well he's actually getting paid to serve porn all day and so and so we and then so then we had to figure out how to hire people based on you know resumes and interviews and so on and that was something that no I had never done not we were fresh out of school had never done before and I think we learned a lot through trial in there but we just didn't know any better to pay attention to company culture and a lot of the people that we hired weren't great for the culture and by the time we got to a hundred people I myself dreaded getting out of bed to go to my own company which is kind of weird feeling you know just losing control of the culture of of your own company so that's really what drove the sale and I actually had vesting that was remaining but decided to leave the company show that we have to sale instead mm-hmm so you it was interesting when you turn down the 20 million from Jerry Yang you told the staff we're living in a really special time we will never have another 1997 yeah I moved here in 99 just a little bit after and you know whenever you hear people over the last five six years say this is just like 99 it's like no it's not like 99 at all there's so many people who come here since who don't understand what that arrow was like what stands out in your memory about that time I think it was I mean to me I had just gotten an email account a couple years earlier and so and it was and this whole idea of there's this thing called when I was in college there's this thing called gopher which you went around and it was all text-based browsing and then one day when my roommate showed me this graphical way to kind of navigate things like that was that was it really seemed like a really revolutionary I mean it was a revolutionary thing at the time and you know one of the really interesting things about the San Francisco is the valley in general now that I've noticed over the past few years is you can walk into anyone and anyone what I what I love about it is the entrepreneurial spirit that everyone has it's like I go you know I have this idea to do XYZ and that's gonna change the world and we're gonna you know make millions of dollars off of it and like people really believe in that and mean it whereas back in the early days like that was that was not normal and so you know a lot of people thought we were kind of crazy for for wanting to you know do stuff where you know we got lucky with link exchange and is anyone gonna go buy shoes online that type of game so after link exchange you set up this you know you start buying some properties you and your friends kind of move in this area above the AMC on Van Ness and you decided to start sort of a fund incubator called venture frogs I remember one of the first times I ever drove into San Francisco it was the first week I was in town and I drove down Van Ness and I saw something says bencher frogs and I was like Jesus Christ we are in a bubble some idiots named a venture fund venture frogs it was actually a dare is that right yeah I mean I I guess a friend of a friend of ours had a pet frog that has since passed away but but she was in love with this frog and so we we just needed a random name for our venture payment and it was a lucky name it was a lucky name there's a lucky name you end up making quite a bit of money off that well most of most of the returns from that actually came from Zappo's and and so I think one of the things that we learned through the process or at least I learned through the process was that to me investing was actually kind of boring I felt like I was sitting on the sidelines and I really miss being a part of building something Zappos was one of I think it was 27 different companies that we had invested in over the course of year I just started spending more and more time with Zappos and ended up joining us apples full-time so so so yeah I I think it's really for me I'm just more of an entrepreneur at heart I guess so tell us a little bit about why Zappos sucked you and so much because you know for people don't who don't know the history it was an idea you weren't even that captivated by at the beginning fast forward and you know a couple years later were in the crash September 11 this happened I mean worst time to be running the dot-com possible and you are selling every property you have you are using every amount of money you have ever made from any other venture and pouring it all into this company it becomes your job your obsession you know what you do and what you're still doing today so you know we hear about entrepreneurs all the time who build something because they want to see it in the world or it's very personal to them but yeah this wasn't your baby and it wasn't something you would have started what was it about Zappos that grew to be so compelling I think in the early days it was just the people the team and you know that sounds super cliche but it's it's really just the people that that were there were people I would choose to be with even if we weren't in business together in and so that actually became a big part of our interview process because I didn't want to repeat the same mistake I'd made at link exchange and so from the beginning Fred who has been with Zappos we joined that actually at the same time he and I would interview every single candidate that came came through while Zappos was still in San Francisco and you know in addition to interviewing for the standard stuff one of our criteria was is this someone that I would choose to go grab a drink with they even have you know just you if we weren't in business together and as the answer was no that we wouldn't hire them and so I think that and and in the beginning it was just you know lucky like it just happened to be a good group of people and then and then it just kind of continued to grow that way and that's and initially it was pretty much for selfish reasons it was I don't want to do what I had done and link exchange from the culture perspective mm-hmm so you know you guys are one of the very few e-commerce companies you know that's survived this sort of nuclear winter and you did it you know without venture capitalist bailing you out you know you you did it really by you continuing to pour your money in at a time when really most investors and most of Silicon Valley turned their back on the internet and thought oh we were all wrong we can't build businesses over this was there any hesitation I mean it was definitely scary but but I think that's when you know you're really put to the test of what you believe in whether you're willing to go all-in from a money perspective and from a you know energy and and emotional perspective and and it definitely helps having a team that's going to do the same thing and a lot of people view me as having taken a big risk for basically doing a fire sale with all my assets and putting it into Zappos but Fred you know he had I think just had a kid or had another kid on the way had just gotten promoted had just bought a house and so on so a lot of ways I view him as actually having put a lot more on the line than he was risking a lot more and and you know in terms of sales we were still going but yeah it was because of 9/11 the war the recession the internet the first dot-com crash and so on that nobody was going to fund us not only we actually was no one willing to fund us but we had raised I forget it was 200 or 250 K in a convertible note yeah from and one of the PCs built all out I I wasn't going to say any names but but basically where the money was we were asked to pay back that money I you know kind of at the low of our lows they thought there's there's so no way that was gonna convert into equity worth anything they wanted you to pay the loan back I think I mean at the time it wasn't unique to them and just everyone thought there's no way ecommerce is gonna I mean this was stirring you know Twitter was a pets calm and etoys and you know all the e-commerce companies were not we're basically burning trash burning cash and about didn't look very good back then so it yeah it was a dark time for e-commerce from an investor perspective and so I think the last thing people want to do invest was a company that was trying to sell shoes online mm-hmm now the silver lining in this is you got to really control the company's destiny and you you know owned a large percentage of the company which you know gave you a lot of control that probably people who would have raised money in the late 90s and gone public may not have had but how important was that in hindsight you know when Mark Pincus is here and we asked him advice for entrepreneurs in the room you know he just repeatedly kept saying the most important thing is control do you feel that I think for it depends on the person so for me definitely and so I think and then you know if you fast forward to the end of the book and there's a section where I talk about this research that's coming out of the science of happiness and one of the frameworks for what makes people happy is it's actually just about four things first one is perceived control this is perceived control perceive progress connectedness meaning the number and depth of your relationships and of being part of something bigger than yourself that has mean to you so I think you know I'm guessing for most entrepreneurs control is probably pretty important but I think it's it's kind of just an innate human thing to be in control there's actually an interesting research study that's been done where they put people they would put a person in a room and there'd be a big button there and I think the first group they just would subject those people to like really really loud you know annoying noises for however long and then afterwards they would measure their stress levels and happiness levels and so on and then in this second set of people they did this too they told them that they're gonna go through this but at any time they wanted the sound to stop they could just press that button and it turned out that the second group never actually press the button but in all the tests afterwards they were happier and less stressed out and so on even though they were subjected to the exact same noises so the button didn't even have to actually do anything it's more than that perceived control that I think people need interesting so in the case of Zappos though it wound up being quite important that you had the control that you did there's been a lot that's you know sort of been written and said about what went down with the the sale to Amazon and I know you and I talked about it at the time as well you you didn't want to sell the company and your investors did which is something that a lot of entrepreneurs may be surprised at because we've seen quite the reverse in the last six years where entrepreneurs want a quick cash out and investors are frustrated because they're kind of getting all these singles and not any home runs what was going on in the boardroom and how long was that a gap I think um I think like framing as whether to sell or not sell is probably the wrong way to look at it really it goes back to the control thing like there's this thing we want to do with Zappos and in a vision that we have and you know that's evolved over time to originally was let's just sell a lot of shoes and clothes online to let's build a brand around customer service and then and then you have a business strategy around company culture and help spread that to other companies and then we simplified that equal to that's just making it make it a be about delivering happiness whether it's the customers or employees and vendor partners and so on and and now with the whole Vegas thing we've actually added a another element to it which is about helping build community but really we are thought has always been from the framework of you know whatever the evolving vision is what's the best way to get there and and then and having control to get there and so you when you know there's a lot of situations where if whether it's and this isn't even specific disciplines but whether you're board members or other investors if they're not aligned with the vision and kind of the strategy of getting there then that creates that misalignment can can create issues and so you know I think kind of the knee-jerk reflex is well if we don't sell them we'll have more control and we do sell then we'll have less control and we've been you know the short version of our history with Amazon is we they had wanted to acquire us many years ago and we said no because exactly that we they wanted to do in the context of us losing control of folding it into the Amazon brand and so on and then when we said no the first time that's when they launched endless and common and so on and I think I just read a headline today that's and initially the goal of endless I think was to kill Zappos and then I just read in our headline today I think that they're shut down and was so and then but we stayed in touch over the years and then finally during this whole time period that you're talking about they said they actually came back to us and said okay this time actually we'll consider doing things differently and we told them we'd only consider an acquisition operatives APIs could remain independent if we could continue to grow our brand our culture and our way of doing business our way and so basically from our point of view it's as if we swapped out our previous board of directors with a new one and our new board of directors Amazon is actually a lot more aligned with our vision and a lot you know Amazon has made plenty of headlines for being long-term thinkers anything and so on and so it's you know it's been what two and a half two and a half almost three years now so I have to report that they remain true to their word and I remember one of the early you know equivalent board meetings we had with Amazon after the acquisition was we we were in the scenario where I get the exact details but we use it used to take us something like 10 days to if a customer returned she was 10 days to refund their purchase onto the credit card and that was just a function of how much inventory we had in our cash flow cycle and so on and one of the first things we want to do after the acquisition was say actually let's let's let's reduce that time and let's make it go from 10 days to I forget the exact number call it 5 days or 4 days or something and went into the equivalent of the boardroom at Amazon and was prepared to make all these arguments how it's gonna pay off in the long term and Jeff Bezos was like oh it's better for the customer then let's do it and so next item and even though that decision actually had a negative effect in terms of millions of dollars from a cash flow perspective so that's an example where you know we're a lot more aligned on the customer side in the long term thinking mm-hmm how much do you report the jeff bezos how frequently do you guys talk not very often he has he actually has he visited our office once but by some weird coincidence I think I was in Seattle when you came and visited for an hour - and so yeah I have an Evan Cena mad Sabbath since the acquisition happened and and then in Seattle I'll see him maybe twice a year but usually it's in the context of you know meeting with 20 people so so we actually don't they've basically left us alone mm-hmm it's so unique that that actually happens I mean it's one of those things that everybody says when they're going into an acquisition oh why would we screw this thing up that we thought we're absolutely gonna leave them alone and then the management always says oh we're absolutely not gonna leave we're gonna continue running this thing and like this is one of the only examples where both of those things happened and I think it's not coincidental that Zappos has continued to grow customers haven't seen any difference of you know it being part of Amazon recently a friend of mine told me a story that that her one of her best friends had gone to visit her mother for Mother's Day and was flying back home and it ordered her mother these shoes that she liked on on Zappos and she was flying back home and when she got home she realized that or she she got a call that her mother after dropping her off at the airport had been killed in a horrible accident by a truck and she was very sort of shell-shocked and started just going into you know sort of things she had to do mode and called Zappos to let them know to see if they could cancel the order and not only cancelled the order they sent a gorgeous hand-delivered bouquet of flowers to her house the next day I mean these are not things you usually hear about still happening once a company is exited what did you do in the early days to make sure that culture wouldn't die I think it's just we well we hire when we hire people we do two sets of interviews the hiring manager and his or her team will interview for the standard stuff but then our HR department does a separate set of interviews purely for culture fit and they have to pass both in order to be hired so we've passed on a lot of really smart telling people that we know can make an immediate impact on our top of bottom line but if they're not good for our culture then then we won't hire them for that reason alone and and so I think it's so much easier if you just hire people that inherently you know just as a person having nothing to do with Zappos like want to over deliver and deliver great service and make people feel good and and we don't actually have a process or procedure for oh in these conditions send them flowers we really just leave it up to each individual rep and what is your day-to-day like now because you know when whenever the rare times I've gone to the Zappos headquarters um you know your your desk is empty and when I see you you're out speaking to people you're doing stuff downtown you know you're having meetings about downtown Vegas how much are you really running the company so I'm not involved in the day-to-day in terms of like oh let's get our website shopping cart conversion page up you know point one percent for me my focus is really on setting the foundation for our move to downtown Vegas and and which I actually think is the best possible thing that I could be doing for Zappos so we actually just moved 200 employees to a temporary location in downtown Vegas about two weeks ago but we still have I forget 11 or 12 hundred employees back in our Henderson off campus which is a suburb of Vegas and our final move when we move everyone into Downtown Vegas into the old city hall is next end of towards the end of next year and so it's interesting because I actually had the rare opportunity to talk with 101 Jeff Bezos a few months ago and when I when I was in Seattle and one of the things he's always been interested in is how do you organize a company so that it can scale and still be efficient and not fall you know most companies as they get bigger become more bureaucratic and less efficient and so on and one of the really interesting things about cities and you can there's TED talks about this in different books about this is that every time the size of a city doubles productivity or innovation per resident increases by 15% whereas as companies get bigger generally productivity per employee goes down and so from the Zappos perspective one of the things we're trying to experiment with and figure out is how do you create this kind of really interesting hybrid that's never been done before between corporation and city and communities so that they all feed off of each other and it becomes this virtue as a virtuous cycle and that 15% an increase in productivity is kind of this accidental historical average that's happened in cities so I think if we're actually thoughtful about our design we can actually accomplish much more than that and then it becomes a window and when not just for examples but for the community in the in the city and so that's really what I've been focus on is really laying that foundation so that when the rest of employee is moved to John Vegas then really the ecosystem and environment that has has got is far far enough along where we can really just start accelerating then when did you imagine you've been spending a lot of time downtown when did you first really start thinking I want to move the company here I'm gonna invest three hundred and fifty million dollars of my own money and make it the next however many years of your life making this the most you know kind of connected awesome walkable product productive community in America it's weird cuz you know I'm totally into all this urban ISM stuff now but the thought was the last thing on my mind you know two and a half years ago and originally we've actually been looking for the past as a seven or eight years for a place to build a campus where we could house everyone under one roof right now and Henderson were spread amongst three different buildings and now with our new downtown extension we're in four different buildings and it's been surprisingly hard to find a place where not only can we house everyone under one roof but having enough landings to expand upon us so for the longest time my whole mindset was hey let's go around and the big plot of land somewhere that's really cheap and then we'll build our own campus like Google or Apple or Nike have and and and that was kind of the vision that we talked to employees about for the longest time over snow one day we're gonna have our dream campus give us your request and wish list for what you want on their campus and so I remember when I visited the Nike campus they had this running track that went around their beautiful campus and then one of the places there one of the buildings there hadn't on had a pub in it and I thought we need one of those and so by the way I thought for the Vegas portion we will bring a little bit of Vegas to you in case you and you're like doing shots at any point we don't have any dancing girl what we're gambling just shots well there's actually it turns out there's jail cells in the in this city hall and so we've been talking to some folks about actually turning that into a speakeasy bar and it's what everyone needs in their office and I thought a good name for it would be just bars but but and so people so employee requests from employees were like oh we wanted gym and we want a bar and and so on but the number one request we got from employees was actually doggy daycare like more than human daycare and so and and and as we were collecting all these ideas that was right around the same time period when myself and others that was employees had started hanging out and discovered this Fremont East area and it's the most community focused place I've ever now lived and I and I grew up in in the bay area and lived in San Francisco but I've never really been to a place where the bar owners hang out in each other's bars and so the whole vibe and culture in this Fremont East area is actually very much aligned with our culture at Zappos and then when I found out City Hall was two blocks away it was one of those coincidences that was like too good to be true and so it was actually there's this guy named Michael who I think the owner John Hancock two-room and his wife runs the coffee house down the street and as we were telling him about our idea of like let's buy this big plot of land and we'll build our own campus like Nike or Apple or Google he was the one that actually told us you should really think about doing it downtown instead and he was the one that got us to shift our thinking so that instead of really just focusing on ourselves to kind of turn it inside out and take more of an approach like NYU where the campus blends in with the city and don't really know where one begins and the other ends and rather than focus on ourselves focus on the community and the ecosystem and in the long run it's actually going to help us attract and retain more employees and so in the short run actually there's been cases where we've had some of our top tech employees at Zappos leave Zappos to start their own startups that then Vegas tech fund or a downtown project end up funding and part of that is just to get the whole tech startup ecosystem going there as well and so there's a so downtown project is a separate company from Zappos and they really complement each other we're part of the investment is to invest in small businesses that help build a sense of neighborhood and community and really create all these collision points and part of it just invest in tech startup companies and we're also investing in education arts and music and and real estate and kind of the guiding principles on the so on Zappos we have what used to be the three season house of forth four C's that we think of in terms of our brand and its clothing customer service company culture and community on the downtown project side we have our three C's which is about collisions community and co-learning and so really by getting people to collide with each other as often as possible within the city context and those are the conditions that I think will historically have gotten these 15% increases in productivity or innovation but I think we can actually accomplish much more than that now this obviously came after you guys already moving the company to Vegas and you spending a lot of time there but every time I mention what you're doing and you know the fact that my husband's working on one of your projects and so we now spend ually we've been sucked we now spend half our time there everyone always says why Vegas it's not even supposed to be a city it's like just this capitalism you know sort of mistake of a city you have to import everything it's expensive you know it shouldn't exist people feel it's soulless you know it's all about sort of every vice I mean the whole marketing campaign to come there is to forget what happened and never talk about it so what is it that you love so much about Vegas I mean why Vegas I think partly because well one the area were focusing on is that what you're talking about is basically the image of the strip which and what we're focusing on is if anything is the anti strip is its it's the complete opposite of all that stuff and so I just think it was really weird and that you know you go to this location that almost nobody knows about and you know these people are so collaborative and open and friendly and so on but then as I started think about it more I realized that it actually makes sense because Vegas you know as a whole including all the suburbs is such a transient area and the people that stay actually really really want to be there and are purposeful and care about community and so it's one of those things where yeah if you can't you don't really get it till you well you you know like you don't really get it till you're actually there and experience it and so that's actually how we get people there we don't tell them oh you should move there it's it's great and so on instead we actually have a bunch of furniture we have about 40 furnished apartments that we've set up as free hotel rooms and it's actually the same high-rise where I live and we I just tell people hey next time you're in Vegas come stay in one of these free hotel rooms and they stay there and they're basically tricked into going to the local coffee shop and a local bar and so on and the experience in the community and then the place just just kind of kind of sells itself but I mean and in the past you know in nine months we probably had around 10 or so text Ardwick companies moved from other states to downtown Vegas because they as a result of that experience as a result of visiting this Fremont in East area and you know we asked him why what made you finally decide to move and usually it's one of two reasons are usually both reasons one is they actually want to be part of the community and want to live in a world where it we've been told like it seems less mercenary and it's more just just people not competing with each other but helping each other yeah and and then the second reason is really just this whole idea of thinking of the city as a start-up and how many times in a lifetime do you get to help shape the future of a major city and so I think those those things really end up drawing a lot of tech startups to just out there do you find that when people move there they go through sort of an arc of enthusiasm and frustration I mean you know in our case you know we spend about half time there so we're not there full time and I do have to say I mean it does feel very community-centric I always hated Vegas because I went there for conferences or whatever and load the strip and just thought you know there's no way in hell I'm spending that much of my time there but the first time we came there just walking around it felt more like the south which is where I'm from I mean it felt like this sense of community you don't feel even living in a neighborhood like the mission in San Francisco and you know because you bring so many people and I've found like I run into investors of mine in Vegas and spend more quality time with them than I do in San Francisco so I think that collision thing there's something to that but you know we're there last weekend you know we've flown in we're out of formula we have to get in the car we'd take the baby put the baby in the car drive about ten miles to a Walmart which is just a horrible experience because there's no grocery store in downtown Vegas we then have to come back and for the next two nights we de literally moved the baby's crib into our closet so he could sleep because there was thumping music outside that was literally shaking our windows I mean you've got to be an herb pioneer to move there it is not an easy place to live yeah well it depends it so where the Ogden which is where where I live is violet right yeah it's it's in the heart of what's known as the entertainment district and so specifically it's that area however many blocks it is is meant for loud music and and so on but that's not I mean you can go to be fair we live on cap Street which most people think is an insane place to raise a baby I mean I'm not someone who lives in suburbs but like this is insane even for a party area so but this area was specifically actually designated to remove the noise restrictions and and also there's other restrictions that were special for the cuz cuz I'm Vegas there's that most people don't know there's actually laws where bars can't be within 1500 feet of each other and so this that was a very purposeful decision for for the free monies entertainment district but I mean but that's going back to really thinking of the city as a startup and with any startup or that's just part of being an entrepreneur like there's it's not always gonna be easy and there's gonna be ups and ups and downs and you're not always gonna have exactly all the resources that you would like but that's that's what at least to me that's what's part of me makes it exciting if it was basically like just cruising onto a I guess cruise ship then then it'd be kind of boring how do you think your employees are gonna react to it when they all move because you know you guys have been out in a suburb where there's a Whole Foods across the street you know it's very plush it's very cushy you know I would tell was talking to some of the employees who've just moved down a couple weeks ago and you know some of them were upset that there were not like Zappos security guards on every block you know between the office and their car and you know we're complaining about it and you know Zach who's kind of your right-hand guy with the downtown project was like this isn't Hershey Pennsylvania I mean you're living downtown we're not gonna put Zappos security guards everywhere you know recently you guys invited hundreds of Teach for America people none of them decided to come downtown I mean is it a harder sell than you expected are you worried about your employees not really worried about our employees but but I think the difference is really just people that are used to city living and versus not and you know if you even if you went to Zappos its previous headquarters which we're at Van Ness and O'Farrell right it right next to the 10th tenderloin you know the that's not for people who's wanted live in the suburbs in and only stay in the suburbs and and so I think that's part of it for Teach for America specifically we have it's been an interesting challenge trying to get them to actually live downtown because they basically they don't know anything about the city and so they basically go wherever the previous generation of TFA people went in they all lived in the suburbs before and so that's something that we need to figure out on the flip side we actually are have partnered with the organization called venture for America which is actually modeled after Teach for America that for college grads that want to become entrepreneurs and they've been completely embracing the downtown lifestyle and and and I've had actually been been really amazing and we're looking to actually up our support next year for for venture for America mm-hmm so do you you mentioned you try to let it sell itself what percentage of the people that you would like to come to downtown get excited about it or do you not look at it that way I mean all these you have hundreds of people who come and stay in these crash pads every month I guess it's so weird it is I guess the the thinking has kind of evolved over time it originally was let's get a lot of people let's bring them here and then let's get them to move downtown and so on and then I started doing the math of like what is it so so there's this great book called triumph of the city written by a Harvard economics professor that studied cities from all different time periods like Rome New York Detroit and worked out why some thrive and some didn't and that's part of where the research like every time the size of the city doubles the productivity increases by 15% and the conditions where that happens is that you get a hundred residents per acre combined with street level activity for them to combine to collide with each other and so things like cafes and bars and restaurants and so on and so we really started thinking what is a 100 residents per acre how are we gonna get to 100 residents per gram what do what does that mean that means we have to build high-rises to four to mathematically work out but and so the original thought behind downtown project is okay we're gonna invest in building some high-rises to get to that density but then as a certain thing that what is the value of a resident I just use myself as an example I'm out and about in the community in a collisional wave community collisional wait call it three or four hours a day times seven days a week I also travel a lot so call it forty hours a year or 40 weeks a year and that works out to about a thousand roughly collisional community hours a year and so maybe instead of a hundred thousand residents or a hundred residents per acre it should be a hundred thousand hours per acre and collisional hours per acre and and as we started think about a more you know we've Ted is this great conference that happens once a year where half the valley is there's interesting content and the other half is no matter who you run to they're doing something interesting to change the world and you know South by in Summit series and so on there's a number of different conferences and where it's all about accelerating serendipity and and what we realized as these people are coming is they're also you mentioned they're also meeting each other you you're meeting other people that aren't living in downtown Vegas and so we now have started thinking okay what if we had a tech week there every month in a more fashion focused week and as we were talking to think about fashion week we actually met with someone who I think he had the largest fashion Kickstarter campaign and his manufacturing his name is Jake and he manufactures men's underwear and I think it's somewhere the factory somewhere out of New York and his family's there so he's never gonna actually move to downtown Vegas but as we're talking about this Fashion Week idea we thought well what if instead of moving to downtown Vegas you come to Vegas once a week during or once a month for that week during Fashion Week and you somehow contribute to the community you maybe give a talk in about what you've learned as a not fashion entrepreneur to help other fashion entreprise you have office hours or QA and so on and if you do the math on that he would be out and about just call it 12 hours a day times seven days a week times twelve months in a year and that actually works out to about a thousand collisional hours a year and so now we have on top of getting people to move to downtown Vegas this whole idea of we've been calling it subscribing to downtown Vegas but really just being a purposeful visitor and contribute to the community and so I think both of those things and really just focusing on what's going to result in more collisions in a more powerful community I think those all of these things combined are really gonna accelerate what we're doing and you know most city revitalization projects take took and do 20 years and I think five years from now downtown Vegas will be a completely different place it'll be like how Facebook was five years ago people will turn out and be like what what just happened no I always feel like when I hear you talk about downtown there's a lot of inherent seeming contradictions about it I mean you know you've just talked about how great an intimate this community was and how that's why you were drawn to it but now you're saying in five years it'll be a totally different place I feel like by the same token you're talking about wanting to do something for the community but also making it the campus for your company and bringing in all of these other people and you know look in order for downtown Vegas to become a safer place a lot of the people who hang out in downtown Vegas are going have to go elsewhere so how much of it is celebrating what's already there and how much of it is is changing what's there I think it's a combination I mean within any city you're gonna have issues with when I live near the Tenderloin for example issues with the homeless and and I think even if you go to Times Square there's homeless people there and so that's just part of city living and and so one perspective is they're still there but now there's a lot more people there so you just naturally feel safer because there's there's more people there and and I don't know the specifics of weather I don't know the specifics of like whether it's actually this exact same number of people there or not but I think it's a kameen ultimately going back to the increases in productivity and innovation the research has shown most innovation actually happens from something outside your industry being applied to your own and so that's why co-working spaces work well when you have people from different backgrounds there and so on and same thing on on the community and city level like if you have exactly the same mindset of people there or if you make it just a one company town then actually it makes that's actually I mean there's examples that where the cities actually end up becoming really vulnerable because they're relying on that one thing and it's about bringing together all these different people with different backgrounds and so on but I think what you really need that they all need to have in common is they need to care about community and contributing to it and that's what's going to accelerate the growth in so are you building it for the people already living in downtown are you building it for the people you're bringing there it's I think it's all it's all of the good mm-hmm how did you get to the point how did this become such an obsession that you decided you wanted to put so much of your own money into it I mean I think there's two things that always shocked people the first is why Vegas and the second is he's putting how much of his own money into this I think that's I mean it's not just money it's time and I think that's just how I've always operated it's you know some people talk about work/life separation or work-life balance and for me it's more about work-life integration at the end of the day it's just like so might as well put your all into it but also you need to make sure that whatever it is you're working on it's something that you're super passionate about and you're not doing it for the money mm-hmm now it's interesting because you know I hear I hear two things from people about this I think when you talk about this sort of bigger vision of community and you know trying to make this you know a great place and have people coming in who are doing sort of selfless things for entrepreneurs and not necessarily you know having everything be profit motive motivated the way the arts and you know some other things aren't you know then people hear it and they're like well he's a crazy business man he's never gonna make a return on this if you talk to some people inside Vegas who feel like you're not really providing you know city services you're not really solving the big problems you're opening bars and restaurants and you know funding businesses so that all these people you're bringing they're spending their whole paycheck then it's like you seem like a really shrewd businessman but suddenly sort of the lofty ideals are gone and a lot of people feel like there's been more of a shift as you guys have gotten going where it's gotten less about the ideals and more about what's gonna be the profit on this how do you see that tension and between those two camps where do you think the reality of the downtown project is I guess I don't really see it as attention I think that I mean take let's just take a step back downtown Flint the subtitle of my book is a path to profits passion and purpose and the reason that was the subtitle is because the research has actually shown if you read books like good to great by Jim Collins or tribal leadership the research has actually shown that companies that have a higher purpose beyond just money or profits or being number one in the market or being their competition those that have a higher purpose actually end up generating more profits in the long run and so I think it's more about timeframe of long term versus short term and at Zappos and for denim project it's really always been you know trying to maximize long-term and then those things actually aren't misaligned like you can do well and do good mm-hmm do you feel like you communicate this well to the community you know I know that there was an incident recently where there was some confusion you guys took ownership of a building people thought they were getting evicted people got really upset and then you extended the leases from my own experience when we first started coming there I would ran a run into random people and tell them what we were doing and they would almost describe you in messianic terms and you know now people feel like Zappos people are taking over downtown I mean I think one thing I read in the sort of local Vegas magazine this weekend which is really in ylim attic of the confusion that I tend to hear on the part of Las Vegas who aren't part of your vision or feel they're not part of your vision is this and this was written by a guy who keeps trying to get an interview with you and you keep saying no so I'm gonna read it I didn't know just to clarify it we actually did the interview okay great yeah I had my old stack of Vegas magazines he said so I guess my first question for Tony Hsieh would be whether he feels that too many people including me have crucially misunderstood what he's Tim attempting to do in downtown Vegas some see him as wielding mayoral power but he's not the mayor he's a businessman a shrewd one making a calculated investment in an opportunity zone as cool as the newsstand and Ted space looks the downtown core still has many unaddressed needs transportation a full-service grocery store basic services to help the homeless that they're not his to provide how will he react when people begin clamoring for them I hear people clamoring for them now oh yeah grocery stores definitely a big honor listen and so what he's referring to just so everyone else knows is on the most prominent corner of I think all most prominent intersection of all of the Vegas area which is Fremont in Las Vegas Boulevard rat there's this building that we've acquired where I think people wanted us to start a music venue or a big bar or whatever and we've actually decided that instead of that we want to build a speaker's theater so people can give ted-like talks there and and it would be free to the community and and and these people coming in can just give a 20-minute talk about with whatever their passion about and we've actually already started the speaker series right now we're doing it literally out of construction trailers but then once this venue is built then that's where we're going to be moving them to and and that goes that all goes down back into like really making this whole idea of co-learning as part of our strategy for for helping revitalize downtown Vegas but there the truth is there's so many different moving parts and believe me we've tried to get Whole Foods or Trader Joe's and so on to go down there but the way they decide whether to go to the places they look at the existing demographics they don't look at what the place is going to be two years to an hour or three years from now and so I think some of the things like a grocery store are just a matter of time and also I think those are things that don't necessarily need to be done by downtown project and really what we're trying to do is provide the inspiration and maybe it's you know a few examples of things to help show what's possible but we really want other entrepreneurs and businesses to help fill it in and and so in grocery stores probably a good example of that but do you feel like people don't quite understand what you're doing I mean people who seem to think your job as being the mayor of Las Vegas when you know it's really not it sounds like that's true but but I mean I I think most entrepreneurs and startups are probably misunderstood in the early days and then you know five years later people say oh that was obvious though mm-hmm so I mean you talked about this as sort of building this new hybrid between a corporation and a city you know all of the things that I brought up don't seem to worry you something has to worry you if this experiment fails what is gonna take it down well no this is definitely the thing that keeps me up and you know if we don't get conversion on Zappos you know perfectly right this year like that's a very fixable problem if we don't get this combination between campus and community and city right like that's a 30-year mistake for us and if you just look at the length of our lease and so it's really I mean I mean to me it's this company culture is to a company the way community is just city is the same concept just at a different scale so there's a stuff a lot of mistakes we've made over the years that's apples and we learn from but there's also a lot of stuff that we've gotten really good at and in terms of how to get more serendipitous interactions for example and we think about density of employees in the office and how closely they sit together and I think a lot of those things are now I guess on the city level but but yeah it's just like what keeps meeting up that night on the Zappos side is the culture going away the same thing on the city side is not not helping the community grow them in the same way mm-hmm how does Amazon feel about you doing this and spending so much of your time on this when you're still technically the CEO of Zappos so in my talks with Jeff Bezos he thinks it's a really interesting call it three and a half-year experiment you know because they've organized themselves in one way at Amazon and what's interesting is Amazon actually has just relocated their headquarters to another part of Seattle and then they've seen the whole neighborhood around them thrive and grow and so on and so I think he's we're the lucky thing is we're a small enough part of Amazon compared to the you know Amazon's revenues where I think he thinks it's worth to the experiment how much of that sort of very feel-good relationship between the two of you has to do with how well Amazon's done and how well you've done I mean you know we saw last week and you know everyone has anointed Jeff Bezos the new Steve Jobs you know they had a phenomenal product announcement and you knew you were telling me backstage that you guys have now exceeded two billion in annual gross merchandise sales and sorry what's the question so how much of how much of this serendipitous feel-good relationship between you and Bezos and you being given the leash of this and keeping independent has has really just had to do with the fact that both companies have been doing really well could it have gone very much the other way if that wasn't the case well I think of both our revenues were cut in half then neither of us would be feeling very good there'd be no delivering happiness not to the shareholders I want to talk about startups really quick because that's a key part of your vision and then we'll go to some questions from the audience so a lot of people with a lot of people I've talked to they feel like oh well you know it look at these moving people down there it's kind of a rigged system I mean he'll make money from the restaurants this eventual magical grocery store all of these other things but but people are very skeptical in Silicon Valley that the startup angle is going to work one prominent VC who I shouldn't name said you know there's got to be a name for someone who thinks just because he can sell a billion dollars in shoes online he can create the new Silicon Valley in the desert then I said the term for that's Tony Hsieh technically but I mean there are people who think this is just not gonna happen and you know those are the people you're counting on to help with the follow-on rounds in these companies do you do you worry about that at all do you think that you can prove it to them well I think you know just it's no different than what we were told when we started selling shoes online that we couldn't get funded by Silicon Valley be seasoned in the early days and I think our attitude was and we also actually had the same reaction from the footwear industry itself is you could never sell shoes online you have to try them on and purse it in and so on and our and actually I remember in the early days we were referred by the footwear industry as the Nintendo kids that were you know because they didn't really get the Silicon Valley side and vice versa and so I I think it's just one of those things where you know it'll at the end of the day if the results will speak for themselves and so if and that's how we feel about what we're doing in downtown Vegas some of the startup CEOs that I've spoken with who've moved there you know a lot of them again have said the same things that you and I both said about the community and the serendipity and bringing people in and all that but you know it's a it's a hard place to either hire or get employees to move to there's not another a lot of other jobs if someone brings a spouse you know it can be hard to convince people to move I think some of the some of the entrepreneurs expected you were running a little bit more of an incubator and thought there would be more help than they necessarily get and and some of they like frankly when they try to raise a follow-on round there's a sense of adverse selection where people say oh you just got funded because you were willing to move to Vegas and Tony gives everybody money who's willing to move to Vegas do you feel like the entrepreneurs who choose to take this step know what they're getting into is it a certain type of entrepreneur who should only consider this I would say independent of this said I think most entrepreneurs have no idea what they're getting into when when they decide to start a company and so you know downtown project and downtown Vegas is itself a startup and so the things things change and evolve but just to give you some statistics we've had 200 something different tech companies either come through Vegas or somehow interact with with the biggest tech fund that we've set up and we've funded I think nine of nine of them so that's it's not every company that comes through we were to get funding he is not funding everyone who comes as lawyers and then the other you know we haven't on the vegas tech fund inside of it we've been at it for i think less than a year and are and we very purposefully say we only our max investment is 500k and we actually don't want a board seat and we we want someone else to take the lead on that and and and you do the big around and you know they have an announcer yet but one of the companies has already gotten funding from a major well-known Silicon Valley VC and and so to us that that's you know one of those examples where I think the results speak for themselves we talked about why you want to put your own money into it how did you come up with the figure of three hundred and fifty million I mean it's one of those things that at one point seems like a huge amount of money because it's your money but if you look at city building it's not a big amount of money I mean I think the one of the casinos that didn't get finished on the strip it would cost you know maybe like three times that just to demolish it and build again I mean construction projects are notoriously ridiculous in Vegas so is it enough money to do what you want to do well I guess the difference is we're not trying to do it ourselves we're trying to you know if you use the iPhone as an analogy we're trying to provide the hardware and the iOS and maybe build a few killer apps to show what's possible and now I guess to you know Microsoft building Excel or word and so on and then we want the other entrepreneurs to basically build the apps and build the things that are really exciting so we're not trying to build everything we're just trying to provide the initial spark it and help accelerate things mm-hmm all right before we go to questions from the audience and I think there's some microphone there and there some people want to start making their way give me the biggest mistake you guys think you've made so far and then the biggest thing that you did right that maybe you didn't even realize you were doing right at the time biggest mistake I think I mean biggest class of mistakes is just anything involving physical buildings or constructions or so on just takes way longer than than you would think because I come from the tech background and I'm used to being able to go from idea to launch in 24 hours of when you're first getting started out and you just can't do that with with you know city regulations and permits and and so on so things just end up taking a lot longer when you actually need a build a physical building and so that speakers land if you for example that we've talked about like that probably won't be launching opening until next summer and the shell of the building is there and I walk past it every day and and and it's just and no one's actually physically working at it because it's just going through this you know whole permitting process so so that's so I think under I'm not doing a good job of estimating the timeline of just anything physical and and the most surprising thing positive has been just how much interest there's been you know for no matter who I meet from from Nome and no matter where they live and this whole thing of having visitors come this wasn't part of the original plan but when visitors come they end up meeting each other and that becomes a very memorable and important part of their experience to the point where we've started seeing people come in again two or three months later partly out of curiosity to see what's happened but partly because the experience is different every time and they're always meeting you know different interesting people from all different backgrounds mm-hmm okay cool monster on this side it's a very tall microphone I'm too short hi it's Kathy Kathy Burks I guess so as somebody who was one of the visitors this summer and who went with complete skepticism about what was going on in Vegas I can tell all of you guys you've got to check it out it's pretty cool but the thing that I question for you Tony is the thing that I learned that was interesting to me there was about I thought that you guys were taking the Zappos culture and kind of infusing it to downtown but really it's more about the philosophy of the a culture so can you talk a little bit about how you take this idea of the the framework of building a culture which is unique to Zappos and taking it to an area that's not necessarily designed for it and galvanizing the community to your to Sarah's point from earlier there are people who live there who are not necessarily part of our world so how do you bring them in and make them part of the culture yeah and I guess you know that's one of the things that sometimes even having nothing to do with downtown that Zappos is misunderstood for is we're not out there saying yes sap has made the fortune hundred best companies to work for less than several years in a row and so on but we're not out there trying to say Oh other companies should adopt the Zappos culture we're just saying other companies any company if you want to build a company for a long term should have values and in a strong culture and in most cases probably not the same values that that's apples Andrew brought the research has shown is that the power actually comes from the alignment by the by having you know values and a point of view and beliefs and and and passion for whatever it is that that you stand for it and so those are the types of businesses that we invest in and I we have we have this week we have someone whose passion and lifelong dream was to open up her own breakfast place and super exciting and and I don't know if you've met Natalie from yes from Eden she oh and so she you know she's super exciting she's finally doing what she's always dreamed of but thought was impossible and so for us that's what's really rewarding it's about accelerating those dreams helping make those dreams happen faster than people would have expected and really I think the only value were looking for a syphon passion and you passing we need confidence and ability to execute in it and so on is really that whatever they're doing is going to contribute to one of those are ideally all three of those C's in terms of community co-learning and collisions great sorry I'm too short for this as well so it sounds like one of your major points for this community is to establish a sense of Kupala culture and community where people are interacting with each other in downtown Vegas and that sounds like it works very well at prismo's where you have two sets of interviews one which establishes cultural fit but let's say hypothetically that a few companies want to go to downtown Vegas establish themselves but are steadfastly determined that they're not going to do that second interview where they determine their their employee is that culturally in their community or want to put themselves out there like like your employees do how would you reconcile that ultimately if there are people who come in who don't want to be involved in the community like that well so a city you can conveyor of a city can't actually tell its residents what to do or where to live in and neither can can we and so I think for us it's it's less about telling those people they can't be there it's it's more about really trying to accelerate the growth of the people that you know are community focused and collaborative and share and open it and so on and I think you know every city has its own kind of vibe and personality and and just like the culture of a company usually is somehow a reflection of the early employees and the founders from the early days and it grows out of that I think what we have is kind of the equivalent of the founders and which are a combination of existing businesses and so on and so as we grow that that yes there will be homeless people there and yes there will be other companies that move there that don't fit in with exactly that vibe but I think over time the dominant vibe that we're trying to is one where it is community focus and collaborative and sharing but I think he brings up an interesting point I mean in making this the campus for your company I mean you talked earlier about one of the things that is a sign you know ed predominator of happiness is being able to have control and when you were you know you you consciously built Zappos to control the culture because you didn't in your first company I mean if you view this as a startup you can't control the culture and you're now putting your company that you very artfully and painstakingly crafted a culture into that I mean if that Zappos is campus doesn't Zappos become different well I guess the way we've if you tour's apples you'll see all these crazy decorations and so on and the way those have sometimes I get asked oh how did you come up with the idea for doing that thing in the steroid and whatever and I I didn't it's more about I guess encouraging or getting that type of organic growth and that's exactly what we want to happen in in downtown so yeah I guess there's you know you know for Zappos we're very anti command-and-control and we try to be as decentralized as possible and and that's kind of analogous to what we're trying to do here we want entrepreneurs whether it's small business entrepreneurs or tech entrepreneurs to kind of chart their own own path and and grow we're not micromanaging and telling them tell them what to do so so yeah I guess there is you know part of it is I guess just being comfortable with that kind of paradox of lack of control but then also amazing stuff happens where if you were in control that wouldn't have happened mm-hmm either my name is Noah and I'm the co-founder of twice which is an early-stage startup based here in the mission and I was listening to what you were talking about in terms of bringing startups to Vegas and I think a lot of the benefits that you've been talking about our long-term benefits like finding you're building that community and and fostering that long-term vision that's you know obviously super important if you want to build a big company but I'm also you know I'm thinking about like the day-to-day stuff a lot and in my startup and one of the big challenges I think for a lot of companies in the valley right now is hiring especially hiring engineers and designers and I think the reason for that is just that there are a lot of startups in the valley right now and there's a lot of competition and scene you know there's they're a lot fewer I would imagine right now in Vegas and I was wondering if that is if you've seen sort of a different paradigm in Vegas and if it's easier to find find really good good quality talent in Vegas I think no matter where you are it's hard to find good quality talent and and so and yeah a lot of the people are an engineer specifically are relocating from other places too to Vegas and obviously a lot of a lot of people aren't and they're going to Silicon Valley but one of the companies that's actually in Vegas is coming a called row motive they do iPhone powered robots and they got they were big Kickstarter campaign and so on they were originally in Seattle three people and then originally I think we're coming to Silicon Valley we recruited them to downtown Vegas and now and this was like seven or eight months ago and out there I think 15 16 people and and and all those are I think most of those are people they were engineers and super smart engineers that they've recruited from other states to downtown Vegas and so I think no matter where you are it's gonna be it's gonna be tough and you know Silicon Valley isn't necessarily the magical answer Vegas isn't necessarily the magical answer I think I mean even at Zappos we have a tough time finding talented engineers and from anywhere and so that's part of the reason why I actually think this is a really important strategy for Zappos is because over time we really need to make Vegas a great place for engineers to want to move to even if they don't have a job offer from Zappos or a motive or I was wondering what are you trying to bring your team for such a project sorry I couldn't what are you can tell yeah criteria yes for the team what was the criteria of the employees of downtown yeah I think downtown project right yeah for companies we invest I worse whilst so we actually are trying to be keep the team as small as as possible and so if anything anytime someone says they would like to whatever their passion is they want to help out with the music scene and so therefore they want to join downtown project or they want to help out with the arts scene or or they wanted to throw tech events and so on we actually say rather than we'd rather not actually hire them as employees we encourage them like go well let's brainstorm and think of a business that you can start that will accomplish that same objective and then we'll fund that and then that way you get a lot more autonomy and so on and we get to keep our team as small as possible so so so really that's we really actually don't want more people on the team we want we want fewer people on the team and and more entrepreneurs and more businesses but you your criteria for your team is interesting I mean I was talking to some of your guys on Sunday and they sort of bribing Lee said like we don't have a single urban planner on staff we have a single urban planner on staff I mean that would kind of be like me starting a tech blog and saying I don't want any writers or reporters here I mean I get you're trying to come at this with a fresh angle but it's not a good idea I think that we want the people that are good at that you know we're not saying don't do that don't don't come to downtown Vegas we're just saying those are the things that we as downtown project company are focused on we're focusing on getting people to collide with each other there's already people that know how to make sidewalks prettier and whatever and so they should do that but and that's not something that is you know personally that interesting to me is how do you how do you do that I'm more interested in how do you get people from different perspectives and backgrounds to collide more often and have interesting and meaningful conversations and have new ideas and new businesses spark out of those collisions so you if you're gonna keep a small team I would take that as everyone on that team better be pretty damn good because you know they're doing a lot what are the qualities in if it's not urban planning if it's you know if it's not being passionate about a certain thing is it that there'll priests or evangelists what is a yeah we don't like mean people that's why you didn't hire me yeah I'm friend but you started your own business no yeah friendly it's like a good one and passionate about whatever they're working on and so for example my cousin Kanye moved from New York and and she was passionate about education so she's working on starting this early childhood center and then eventually is gonna add grades K basically add one or two grades of your eventually get to K through 12 and she brought along her now husband who at the time didn't you know we didn't really have us just fine role for him and he likes being involved in them he said he liked me involved in a lot of things maybe he would started dog park but he didn't want to like run a dog park for the rest of her life and so and then maybe he would start after that start a bar and and and what the original idea was he would basically launch something get it going and then hand it over and then do the next project and what his role has evolved into is now he's actually just kind of overseeing all the differ small business companies that were funding and one is helping decide who to fun helping them come up with a business plan if they don't really have that type of background and then also getting those businesses to help each other so there might be you know the florists might be really good at marketing and the dog park owner might be really good at bookkeeping and then they can you know help the idea is to get the community to help make itself smarter and teaches itself and then we can also help on the back end in terms of the legal the bookkeeping negotiating credit card fees standardizing them out of the POS system and so on so that the small businesses can focus on their passions and so that's fun under his role so it's actually it turns out to be a really good role for someone who kind of has a DD in terms of you know trying to focusing on one business for life mm-hmm okay great hey hey my name is Martin I was wondering you said you didn't want to do you know urban planning and stuff but but a lot of the functions you seem to fulfill or take on are like classic urban development roles like attracting small businesses and creating or organizing culture events and so how do you see your interaction with the people who are supposed to do that like the city government oh Las Vegas I suppose do do you have like a plan for them or is it just that the absence of anything you just do what's necessary or well I think they're gonna do whatever they're gonna do and and and for us where we meet on a regular basis and basically just let us know if we can help each other out of it and so on but but I think just our approaches are generally different enough where we're not gonna really change the way we we think about things to be more in line with and I don't even know what the traditional you know urban planning kind of you know step by step guide is but but I think we just we just have have a different a different approach and we try to help each other out whenever possible okay I I was wondering are there other precedents and other programs like the downtown project that have worked in other cities that you draw they use an example or get inspiration from and also like as your as the downtown project unfolds is it possible that this type of thing could work in other cities and are like is it possible in the future you'll document this and sort of develop the steps by which something like this could happen in other cities similar so I guess we're not aware of anything where it's been explicitly thought of in this way and specifically in terms of how do you maximize collisions for example but I would again highly recommend that book triumph of the city because that's really been the book that we've drawn a lot of the inspiration from and we're not hoping just blindly hoping that oh if we do these things then innovation approach if it won't increase like that's already been proven historically and you know that's it and so that's you know the analogy I would use is back when we were trying to before we invest in and Zappos actually thought that's at the time thought that was the worst idea ever and and then the founder Nix threw out that on the this was on a voicemail that in the u.s. was forty billion dollars a year and five percent or two billion dollars was already being done by paper mail-order catalogs back then so it wasn't really like this big leap that oh people might buy shoes without seeing them in person beforehand like they were already doing that at the tune of two billion dollars a year and so this whole idea of getting people together and having these collisions in this density and so on and having that result in increased productivity innovation is not a new idea we're just actually focusing our strategy purposely around that and so I don't know that specific strategy with being purposeful about it has ever been done but the fact that it's happened in a maybe haphazard random way in the past is already been done and proven and our goal is to share what works and doesn't work on the downtown project comm website over time to basically open source it and and really for the first time in human history this is just in the past year to 50% of all humans now live in cities and within our lifetime it's that numbers in the grid is 75% so if we can make downtown Vegas than those community focus large city in the world if we can make downtown Vegas a place of learning and innovation and do it in a way and share it with the world in a way that's reputable you know and hopefully inspire other cities to fix themselves I mean if we can you know in in some ways we wanted it's kind of like the the four-minute mile you know there was a time when people thought it was running a four-minute mile was impossible and people thought even if you could do it you would die and then someone did it and within a year other people broke the four-minute mile it wasn't like nutrition was better that year it's just people believed it was possible and that's the goal of downtown project is yes it's initially for Zappos and for myself because I live there for the community and for downtown Vegas but in the long run its kind of our plan to you know help inspire other cities to focus on themselves in and fix themselves hi my name is Gingka do and what I'd like to know is what are the signs or the metrics that you would look for in three to five years from now like what signs would you see that would tell you that this has been that you're going to continue doing this overall yes so so that's something we're trying to figure out and in fact we're actually forming a company called I think the downtown metrics company or something good to basically just do that and and so but so the short answer is I don't know all the right metrics but I think some way of and I don't know how you would measure collisions right or or but but I think that's an important metric and intensity and so on but one of the interesting stats that was released by Kauffman Foundation which is this nonprofit that studies entrepreneurship and help support entrepreneurs is he said the majority of all the net job growth in I think it was in the US and it's over a long period of time maybe it was 40 years or 60 years or something actually came from companies that were 5 years old or younger and so I think that would actually be a really interesting metric for us is what is the number of employees that are in downtown Vegas that are part of businesses that are five years older governor and they part of that what's interesting about that is actually that actually eliminates Zappos from that mix in terms of seeing like how successful the whole project is okay Wow just take it as a customer I'm a huge fan of Zappos and Amazon and I've been to every single Pando in San Francisco so thank you to both of you for what you're doing I really appreciate it I'm also a supply chain geek so I think Amazon and Zappos are really interesting cost companies for that reason too but I was really fascinated to hear you not say anything like was challenging at all about the acquisition or merger however you want to call it with Amazon are you like the luckiest entrepreneur ever or any what do you regret about like how that whole thing went down is there anything that you would have done differently you know you know was it just all just awesome it was great Jeff Bezos doesn't bother you at all and so everything's wonderful and you're a happy family now what your employee you say the same thing I think there's a so we actually just announced a few months ago we integrated on on we actually transferred our witness so we have about 1300 ish employees and our headquarters in Vegas and then roughly call it 3,000 employees in Kentucky and we and we announced in I think July of this past year that were actually transferred those Kentucky employees over to Amazon and and that was part of and actually we're now integrated on Amazon's warehouse management system which is completely different from her own so I think that whole transition especially on the technical side definitely it was was one of those things that we think makes sense for us for so that we can just focus on our headquarters and and at the time we made the transfer we what really prompted it is we had two warehouses in Kentucky and we were growing at the rate where we needed to either build a we needed to build a third warehouse and then we started thinking well Amazon has I know 50 60 something warehouses around the world does it really make sense for us to manage warehouse number three and then you know some day in the future Amazon will have some larger number of warehouses or does it make sense for us to actually kind of transition to go there back in and then that actually enables us and Gary to tap into all of their warehouses and and and actually deliver a lot more inventory via beyond just shoes or or clothing and so you know that that was one of those things which it was definitely bittersweet like it like we that's an example of something where I think it's the right long-term decision but a lot of those of Kentucky employees have been with since when we first you know since the early days one was when a person first opened up and so and also I think on the technical side when you're just doing a systems transfer upgrade that's just innately not as exciting as building a new feature that customers love because it's all kind of invisible to customers has there ever been a day where you wished you hadn't sold or has there been a time when you there's something you wanted to do and you couldn't do it as a part of Amazon I mean I feel like other entrepreneurs who've been through this or been around entrepreneurship been through this I mean it's just it's hard for people to believe it's really gone that well well it's it's interesting because the I mean if you even going back to the previous company you know everything ends up being actually in retrospect the perfect path towards where where you end up going and you know like if yes it sucked at the time that link exchange culture was really bad but if it wasn't bad we wouldn't have paid attention we would have been fanatical about it at Zappos and it would probably been one of those things where the culture was great in the beginning and then because we didn't pay attention to it it went downhill and then if we hadn't if we had stayed independent and whether it's we had gone public or stayed private but had Sequoia was our VC partner and if that had happened then none of this downtown stuff probably would have been able to happen at the scale that is happening and and part of downtown project is being funded by the liquidity that happened from the Amazon acquisitions so and I think what we're doing is super super exciting and new and experimental and innovative and those are all things that that excite me and and if it was a and it's kind of funny because if 10 years ago or or even let's say 8 and 1/2 years ago when we first moved the company to Vegas if at that time I cared about urbanism and revitalization and so on which I actually had I had zero interest in 2 years ago if at that time I cared about all that and the goal was less revitalized and I was like I don't think we would have gotten to where we are today with that being the focus at the time like we had to go down the path we went to and then somehow the story just unfolds in weird ways and I think the path we went is actually the best possible path for revitalizing downtown videos so I mean it seems like Zappos has sort of always been this this vehicle for you doing things that you're really passionate about it interesting and even if that sort of changed over the time you've been the CEO of the company are you just very lucky or is there some way you approach this differently than other entrepreneurs where sort of this reality tends to just kind of conform around what you want to do I think it's more about just always I guess being true to yourself whether as a person or as a company and then and then once you figure out that's what you wanted this is who you want to be or what you want the company to be or what you want to stand for what you want to do then the creativity and stuff of stuff forming around that I think just happens naturally on its own because you start talking to people about it and then and then the right people are attracted to that and so on and it actually I saw a James Cameron speak at a conference once and he was talking about how his lifelong dream was to go deep-sea like deep into the sea and go check out the real Titanic and so he said his thing was he basically pitched to the movie studios that he wants to build this movie about the Titanic and the only way to make it sell well is to actually go down there make it authentic again so he basically formed a movie around his passion and you know worked out on both ends interesting so given the current trends in e-commerce such as you know sort of social curation mobile director consumer model where do you see e-commerce going and what do you believe is the future of e-commerce short answers I have no idea I I think that you know there's we've been talking for years at Zappos and probably it's probably been happening in the industry in general is like in real life people like the social part of shopping they like shopping with their friends and so on and how do you actually create that in a compelling way online and we've been racking our brains trying to figure out how and haven't haven't figured out how and it's and I don't know maybe it's maybe it's possible maybe it's not it's kind of like we've been we we're always presented with these different proposals and then we have these different ideas for how do you prevent people from returning shoes how do we get them to just you know buy the right size in the first place and and you know there's been lots of different ideas and and lots of companies have tried it and we've experimented different and and I think for that particular thing I mean if there's a new idea we'll take a look at it but I think we've just kind of said it's not meant to be like like but but at the same time that's part of what's built our brain is just how easy there's free shipping both ways --is so yeah if you know how to do social shopping online let me know right I'm curious how you think about issue of talent it seems like you know you spent a lot of time at Zappos getting a team that you really wanted now you're looking to bring in all these startup you know if this experiment goes well what happens when those companies need to grow you know when they start taking maybe your employees so I guess that's part one of my question and then the other is as you're thinking about as you're doing this project are you thinking about building on a pipeline of talent you know because it seems like out here in Silicon Valley another Stanford there's there's this big powerhouse of you know these education you know there's a source for this talent where I I don't know maybe that exists in West I guess I don't know about it so maybe it's already there but I just be interested to hear how you think about that yeah I think that's I mean I don't know if it's really bad I mean fundamentally I think we believe that if we invest in the ecosystem yes there's gonna be Zappos employees that leave but then that ecosystem is also going to feed back into Zappos and there will be startups that fail and and Zappos will be a good you know backup word and so on the same reason why you know a lot of people come to Silicon Valley from other stages because they're not betting on just this one company that there's a whole ecosystem here and so that's part of the vision for the Jon Hamm Vegas tech scene and in terms of the pipeline of talent what we found specifically for Zappos is we've had been we've experimented a lot and found actually the best way to grow Zappos in general is actually hire people at entry-level that have the right values in our culture food and so on and then train them too so in our merchandising team we hire people entry-level and then over three years they get trained and get bigger bigger portfolios and they become a buyer and so on we found that that's been a lot more successful than hiring buyers from from other companies and so we actually recently experimented with this program that we've internally called Z code where we took a bunch of people from different states and some of them had no programming background and basically I think was a six-week class taught them how to code and the it was just an experiment didn't know gonna happen and the really cool thing that came out of it is we actually hired some of the graduates who are now like gonna be like junior coders and that didn't know how to code at all six weeks earlier and so we're really big into this whole idea of like seeing what we can train and having that be be part of the pipeline in addition to the ecosystem itself being part of the pipeline that's really cool what was it called Z period code parentheses close parentheses it's a coder thing Jesus you're a nerd I told you thanks for comin out tonight you've been really interesting it's great to hear everything you had to say and if I kind of have been looking at getting a house in Las Vegas and I've noticed like if you go out like Palomino road like Alta Alta do you know those areas it's kind of west of where you are or if you go to Las Vegas National Golf Course you have all these ranch-style homes that were built in the 60s and a lot of them have two air conditioned two air conditioning units on the roof and now they're abandoned you know they lived on the market for years no one wants to seem to buy them because the cost of you know air conditioning them or heating them in the wintertime is is perhaps too great and what I want to know is if you're kind of looking at that aspect of like energy usage and costs of being in Vegas that aren't just kind of the rent and mortgage costs you're trying to look at your projects being more efficient and you know green or self-sustaining that kind of that kind of thing so in general actually cities any city is actually greener than than than houses it and and and so I think I think that's one of the best ways to do and what we're focusing on is less about those houses and I'm sure you know some someone whose passion about that will do that though what we're pokémons is making the city waffle and having people get rid of their cars and do bike sharing and car sharing and and so on and and when you live in a high-rise that's one of the greenest things you can you can do and those are the things we're focusing does that mean the area that you're building and has to be smaller than it might have to be in another city because it is hot in Vegas you're gonna have all people without cars walking around sweating hopefully one day lugging groceries yeah I mean do people want to walk in Vegas and hundred and whatever he I think depends on the person well one it's actually just a few months of the year that that is high that it's that it's that high and then to the other thing at least I found this true for myself and people had told me when I first met there is that the first summer is the hardest and then and then it's actually it's a dry heat they say that but it doesn't feel dry you know what I was told when I I mean we saw half move there is that your first year you win whenever you gamble there's this crazy beginner resident luck you experience that uh I think half the people when when they bet on black alright last question hi hi I'm Isaac um so when you use the word campus it kind of brings to mind some of my friends experiences where where you kind of pull people toward the campus and they spend most of their time there and it seems to run kind of counter to the to the experience of people spending time with their families and and I think we've talked a lot about the different issues that come up with single people versus families and what's what's your plan or what are you doing now is apt Zappo to to keep people at the office to keep people kind of engaged at work and what are you planning on using those same principles when it comes to keeping people in the city and not maybe moving out to a suburb or you know gravitating away from the city but to keep them centered close to campus close to downtown yeah well I guess our belief is that a lot of the ideas and and work actually doesn't actually have to happen on the in the office and if anything think of like we're thinking you know every cafe and bar restaurant is now almost like an extended conference room and one of our other goals is to actually make downtown Vegas super family friendly and kid-friendly and so we're working on building parks with where like you the center of it is actually kid focused and and kids are begging their parents every weekend to take them there and then the parents can hang out with other adults instead of being trapped into chuck-e-cheese or whatever in and and so yeah I mean at the end of the day it's it's again it's not about work/life separation or or how do you find that balance it's about work/life integration how do we get people do want to hang out with each other and with their families and kids and and so on and you know in my own personal experience the best ideas don't come out of sitting in a conference room so it's really about just being in throughout the city interacting with your neighbors which you include families okay great so a couple last things so as but all you guys know because you were all generous enough to pay double or a normal ticket price to come here we're trying to raise money for charity water this month and I wanted to thank the people who paid over the forty dollar amount because all we really gave them was like thank yous and t-shirts so they at least deserve to have their names read by me on stage and I'm sorry if I butchered your name so huge thanks to Alex Abrams Michael Albert Anna Ellie they all have heard names Eliasson Roger Lee that one's easy James let's go steel Amelie Lisa kara and Brian trash old and huge thank you to me huh Baldwin who I think is the only person who took the five hundred dollar package so far so big round of applause for those people so far we have raised five thousand one hundred and sixty dollars and I wanted we're gonna do the same thing in New York with our with our panel monthly there so hopefully we'll get that total up but I wanted to get it up even more so I asked Tony before we came out here if he would be willing to have dinner with anyone if they donated a thousand dollars to charity water and this is just pure going to charity water not a penny coming to Pando daily and he actually won up that and said anyone who's willing to donate a thousand dollars he will let you he will put you up for a week at the Ogden and you can hang out with the downtown project Paul and I also live there you can see sort of all of this majesty of every year part of this dinner as well yes yes I mean if I'm in town I'm not gonna fly there for it they have to arrange it with my friend Warren when all three of us are we're all in town we will take you to dinner you can hang out in the downtown project get the tour of Vegas and see firsthand everything he's talking about and you get to give $1,000 to charity water to help Rwandan get fresh wells so if you want to do that email on e at Pando daily that's Oh n I at Pando daily calm and such people in this room anyone watching on the live stream we would be thrilled right you want to make any extra donation money bucks I'll match it but all right you're gonna better I forgot that well now you could have unveiled that like you were unveiling it on stage because I forgot it yes and Tony will match your donation so you're really getting to donate two thousand dollars to charity water be put up in Vegas for a week go to dinner with you me and Paul just maybe a punishment hello cause I'm good yeah you're roped into this too now [Laughter] we're not throwing in the private jet ride you have to do something on your own so very generous of you and we appreciate that one other housekeeping thing our next to Orden we give you a light up for the next Pando monthlies in San Francisco next month we've got Kevin Systrom I believe it's the first time he has opened his mouth publicly since the acquisition and then watching the value of that acquisition plummet in the public markets so that should be very interesting and then we've gotten a vowel Ravi Conte of Angeles in November who swears he's gonna tell us more of this big mysterious Oz man behind the curtain grand vision he's building in Los Angeles we've got Chris Sacca November who has sort of retreated down there and been angel investing in LA and he's going to talk about that for the first time and in New York next week we have Jonah Peretti the co-founder of Huffington Post and BuzzFeed Dennis Crowley of Foursquare in October and Daniel Eck founder of Spotify in November so if you're in any of those cities we'd love to see you at our events after this month it will go back to the cheap $20 price that entrepreneurs love to pay so those are my those are my announcements this leads us to our last question of the evening Tony Hsieh you could have one mediocre superpower what would it be I would want to officially efficiently transfer information so we don't have to do these long interviews all the time [Laughter] you basically want to never have to sit down with me again that is your mediocre superpower is that does that count well I'd call it mediocre [Laughter] you know I think that's not just in interviews I think just you know it's it's great being able to tell the weather you know it used to be the Zappos story now since apos in downtown project and down have Vegas and but it's really hard to scale and so I think being figuring out some way to just scale that and where it's still meaningful to people I think scaling that and scaling personal relationships is really tough and would love to figure that out have a mediocre wait superpower we need to do it great well huge round of applause for Tony [Applause] [Music]

Channel: PandoDaily

Views: 30,705

Rating: 4.7928801 out of 5

Keywords: pandomonthly, pandodaily, pando, zappos, Tony Hsieh, las vegas, san francisco, interview, fireside chat, sarah lacy, Delivering Happiness, zappos.com, amazon, amazon.com

Id: 8MR9koswSyI

Length: 113min 47sec (6827 seconds)

Published: Sun Sep 16 2012