May 20, 2019 · 32m · how-i-built-this
Zappos: Tony Hsieh (2017)
Tony Hsieh · 15m spoken Guy Raz · 10m spoken Mike Bolos · 1m spoken Jason Grohowski · 25s spoken Life Kit Contributor · 9s spoken
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, host Guy Raz interviews entrepreneur Tony Hsieh, exploring how he built Zappos into a multi-billion-dollar e-commerce giant by prioritizing radical customer service and a unique corporate culture over conventional business norms.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 39.3% of the talking time here. How this is scored →
Guy as informed peer 1.6 Guest teaching 2.1 Guest disagreement 0.4 Guy pushing back 1.0
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:52 Rejecting Amazon's first acquisition attempt
Tony describes flatly turning down Amazon's initial acquisition proposal and withstanding their competitive pressure through Endless until Amazon agreed to full autonomy.
Hardest push from Guy ▶ 11:51 Guy challenges leaving millions on the tableGuy presses Tony in disbelief that he walked away from a year and a half of unvested payout simply because he was unhappy.
Biggest teaching moment ▶ 13:49 Tony reveals footwear catalog market dataTony educates the host on how 5 percent of the 40-billion-dollar shoe market was already being purchased sight-unseen through mail-order catalogs, disproving the notion that online shoes were impossible.
Guy holds their own ▶ 9:30 Guy crystallizes the LinkExchange ad network modelGuy cleanly articulates and frames the LinkExchange model as an ad-space network and middleman marketplace before Tony finishes elaborating.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Announcement of the How I Built This Summit | 0 | 0 | 0 | 0 | This introductory segment consists of host event announcements, framing narration, and a brief teaser soundbite with no substantive live dynamic between host and guest. | |
| Unconventional Leadership and Zappos Culture | 2 | 2 | 0 | 1 | Guy Raz gently probes Tony Hsieh's introversion and lack of interest in shoes. Tony offers his greenhouse architect analogy to explain his leadership philosophy in a collaborative tone. | |
| Childhood Hustles and the Violin Trick | 2 | 2 | 0 | 1 | Guy follows Tony's journey from childhood violin practice deception to creating LinkExchange at Oracle, occasionally summarizing the business mechanisms. | |
| Selling LinkExchange to Microsoft and Walking Away | 2 | 3 | 1 | 2 | Guy expresses astonishment that Tony walked away from millions in unvested stock after Microsoft acquired LinkExchange. Tony calmly clarifies that toxic culture and valuing time outweighed financial status symbols. | |
| Discovering Zappos through Mail-Order Shoe Data | 2 | 4 | 0 | 1 | Tony educates Guy on how mail-order catalog statistics originally convinced him that remote footwear retail had massive untapped potential despite initial skepticism. | |
| Surviving the Dot-Com Crash and Selling Real Estate | 2 | 3 | 1 | 2 | Guy questions the severity of cash burn and Tony's decision to liquidate his personal real estate portfolio to fund payroll. Tony details how prioritizing expensive customer service created a defensible moat. | |
| The Amazon Acquisition and Preserving Autonomy | 2 | 2 | 1 | 1 | Tony explains rejecting Amazon's initial buyout attempt and eventual acquisition under terms granting full cultural autonomy, concluding with his minimalist Airstream lifestyle. | |
| Mid-Roll Promo: NPR Life Kit | 1 | 1 | 0 | 0 | This closing segment features an NPR promo and the narrative 'How You Built That' profile of DeskView with highly collaborative storytelling and no pushback. |
Statements from this episode (14)
Tony Hsieh was passionate about customer service and culture, not shoes
“I'm actually not passionate about shoes at all. I'm passionate about customer service and company culture, so I can talk forever about those two things, but I can't say anything about shoes.”
Tony Hsieh: CEOs should be greenhouse architects, not the tallest plants
“I'm probably different from a lot of typical CEOs where I like to use the analogy of imagine a greenhouse where maybe at a typical company, the CEO might be the strongest and tallest and Most charismatic plant that all the other plants strive to One day become…”
LinkExchange started by cold-emailing 100 random websites to swap banner ads
“And so we literally just contacted a hundred random websites that we thought were interesting... Basically that we're trying this thing out, and if you just put this little piece of code into your website, banners will start showing up, and in exchange, you se…”
LinkExchange grew to 100 employees and sold to Microsoft for $265 million
“Over two and a half years, we ended up growing the company, which was called Link Exchange, to about a hundred or so people. And then ultimately ended up selling the company to Microsoft in 1998 for two hundred sixty five million.”
Hsieh sold LinkExchange because its company culture had gone completely downhill
“What a lot of people don't know is the real reason why we ended up selling the company, and the real reason was because the company culture had gone completely downhill, and I myself dreaded getting out of bed in the morning to go to my own company, which is k…”
Tony Hsieh walked away from 18 months of Microsoft stock vesting
“Well, in Silicon Valley, usually there's a four-year, what's known as a four-year investing for your stock, and I'd only been there for two and a half years, so really had to stay for another year and a half after Microsoft acquired us in order to get the full…”
Mail-order catalogs proved a $2 billion footwear market existed before Zappos
“And then the other interesting fact was that at the time, mail order catalogs, those paper catalogs, that was actually the fastest growing segment of the footwear industry in the U.S., and that represented five percent, so two billion dollars a year and growin…”
Zappos tested demand by photographing local shoe store inventory for its website
“Yeah, I mean, so, in order to test out the whole concept for real, Nick would actually just go down to the local shoe store, take pictures of all the shoes that were on the wall, and then put it on the website, and if someone bought something, then go down to …”
Hsieh sold his personal real estate at a loss to fund Zappos
“And basically, as Zappos was growing, it was also losing more money, and we also need more money for inventory, and so I ended up, one by one, selling off the apartments, and it's kind of like when in Monopoly, when you buy a hotel or houses, and then you have…”
Following the dot-com crash, investors refused to fund online shoe startups
“No, and also there were huge companies like pets.com that were e-commerce that were kind of imploding at the time, and so even if someone wanted to invest in an internet company, the last thing they wanted to do was invest in an online shoe company, because no…”
Purpose-driven brands make nonsensical moves that competitors will not copy
“When you actually want your brand to stand for something or to have some sort of purpose, and in our case, it's about to be about the very best customer service and customer experience. You do things that are kind of nonsensical in some ways and that your comp…”
Zappos initially rejected Amazon's acquisition offer to protect its company culture
“Amazon had actually approached us several years before 2009. They just wanted to acquire us and then basically the company being acquired ends up joining the mothership and kind of loses its original identity. And so we said no very quickly.”
Amazon kept its promise to let Zappos operate autonomously post-acquisition
“They approached us again and said, okay, we will let you guys be your own separate subsidiary with your own separate culture and own separate way of doing business. And happy to report seven years later, they've remained totally true to their word. And we've b…”