Zappos and the rise of the dot.commune

Yesterday I went to see a talk by the CEO of Zappos, Tony Hsieh. Tony is famous around the world for the ‘happy culture’ he has created at his billion-dollar shoe company. He sees his work as a mission to ‘deliver happiness’ to the world - not just shoes, but a way of thinking about how to get the most from life, which is very influenced by the ‘happiness science’ of Positive Psychology. He goes around the world giving talks on happiness, and has written a book called Delivering Happiness, which has now been turned into a comic book.

I was a bit sceptical of the idea of a ‘happy company’ - the cynical liberal individualist in me wondered if the staff went around with forced smiles, wearily putting on their party hats to fit in with the boss’ happy philosophy. But what Tony had to say was, at the least, very interesting.

After graduating from Harvard, Tony set up his first company, which sold click-through advertising technology. He initially set it up with friends and they all pretty much lived together in the office, sleeping under the desks, like a sort of dot.commune. But then the company grew bigger and ‘we ran out of friends’. So people they didn’t know started working there - and sadly they lost that culture of intimacy and friendship. The office became a cold, atomised collection of strangers. Tony started dreading going to work at his own company! He learnt a lesson from this - creating a shared culture of values is just as important as making profits.

He sold the company for $250 million (this was the late 1990s, a good time to sell a dot.com). He and a friend started a venture capital fund, and their first investment was into a shoe company called Zappos, which would do for shoes what Amazon did for books: create a website and a big warehouse, deliver reliable customer service, and beat all those little mom-and-pop independent stores through sheer size and scale. Zappos didn’t do well at first, so Tony put more money in, and became the CEO.

This time around, he and his friends put a lot of thought into creating the right culture at Zappos. They created a list of core values, including things like Positivity, Creativity, Team-Playing and so on. They had a careful interview process to make sure new recruits shared their values. Tony says they put their values first: a person might make the company loads of money, but if they don’t share their values, they get fired. ‘It’s not about what people do, but who they are’. He says the key is to get rid of the 10% who don’t share those values.

This sounds less a corporation in the neo-liberal sense, and something closer to a spiritual commune. He says: ‘Some people were sceptical about the whole ‘values culture’ thing, but they really got into it and started using the language more than I did. If you tour the company now, you can feel it. It’s absolute magic when you have a workforce who really share your values.’

Like in that original dot.commune, Tony would ideally like all the staff to live together and hang out together as friends - or at least in the same neighbourhood. He says: ‘Initially, when we moved the company to Las Vegas, we were forced to hang out with each other after work because we didn’t know anyone else in Vegas. That took the culture to a whole other level. We’re moving to downtown Vegas now, and we hope a lot of our staff will start living downtown too, so we bump into each other a lot and are a real community.’ It’s a sort of anarchist utopianism very much born out of San Francisco, out of the post-liberal ‘rainbow tribe’ mentality of rave music (think Burning Man). Tony used to hold big raves at his loft and says he loved the spiritual feeling of being connected to a whole rave by an experience and common values - he seems to want to create that collective ecstatic culture, that tribal mentality, at Zappos.

It also reminds me of older movements in corporate well-being, like Robert Owen’s ‘happy factories’ in the early 19th century, where workers lived together, worked together, and were instilled with Owen’s Utopian values and culture. It also reminds me of Quaker companies like Cadbury’s and Rowntree’s. The Quakers were also all about creating ‘societies of friends’ in their communities and corporations, and would set up worker programmes and settlement houses to create good corporate cultures among their workers.

This sort of initiative interests me partly because I’m from the Rowntree family myself. My great-great grandfather was Henry Isaac Rowntree, who set up the chocolate company. He actually wasn’t a very good Quaker - he was the black sheep of the family, who shocked his strict religious community with his worldly views and his expletive-shrieking parrot (no, really). So he left the family grocer business and set up the chocolate firm. It was his more religious brother, Joseph, who came and helped him run the firm, who really created the company’s whole ‘Quaker culture’ - my grandmother (Henry’s granddaughter) likes to tell stories of how Joseph would make the workers go on long, bracing walks over the Yorkshire moors, and how they’d all bunk off to go to the pub.

The liberal individualist in me thinks I wouldn’t last long at Zappos - I’d be one of the awkward 10% who found the whole thing too collectivist and culty. I wouldn’t be able to stop pointing out the flaws in Hsieh’s happy philosophy - like many utilitarians, he simply can’t imagine why anyone wouldn’t be utilitarian. He says things like: ‘The evidence suggests it doesn’t matter what values a company has, as long as the employees really believe in them.’  Well, that doesn’t sound so great - The News of the World or Goldman Sachs had employees who deeply believed in their company’s values. The problem was the values were wack.

Then again, the Quaker in me is aware that I’ve worked at the normal neo-liberal kind of corporation, where the only culture is ‘make the shareholders more money’, and that wasn’t much fun either. So I’m a freelancer now, in a company of one. Typical ambivalent liberal.

But let me just give the Zappos culture a bit of a poke, if you don’t mind. First of all, one of the company’s core values is ‘Be Humble’. But humility is not the word that comes to mind about Tony Hsieh. He told us he saw his role as a leader as partly ‘to get out of the way’ and let things happen. But when I read Delivering Happiness, he’s there in every single drawing.

Maybe it’s a difference between British and American cultures, but the guy is not shy about sharing his successes: the first box shows him delivering a speech to a hall of cheering employees. We see him setting up his first company at school, then getting into Harvard, we see his friends tell him at graduation that they are sure he will be a millionaire - and then see him making $250 million before he’s 30.

This leads to a typical sort of TED / Silicon Valley / Law of Attraction messiah complex. It’s just so damn easy to make millions of dollars, as long as you think positive! You can make a billion, and still be a cool guy with great ethics, right? Like Google, like Facebook, like LinkedIn. Everybody wins.

But not everybody wins. These big 90s-era Silicon Valley companies succeeded because they were disruptive technologies. They undermined existing business patterns and took market share from more traditional competitors - newspapers, high street book-stores, high-street shoe companies. ‘It’s good if they do that’, Tony told me, ‘because some of these bricks-and-mortar retailers haven’t changed their culture in 25 years.’ OK, but the culture of restless innovation is a young person’s culture. Zappos, judging by the comic book at least, seems to be very much a young person’s game.

I’m suspicious of the TED / Silicon Valley Messiah complex, because it suggests that dot.coms succeed because of the genius / spiritual power of individual entrepreneurs - the gospel according to Steve Jobs. It’s a view-point born out of incredible privilege and entitlement - sort of the corporate version of Esalen, the 1960s spiritual commune outside of San Francisco. But it ignores the historical and economic factors behind the individuals’ success (they are rich young kids who got to go to Harvard and never really lost in life) and behind the company’s success (once the internet was invented, there would always be new internet companies who reacted quickest and beat more traditional companies). And it ignores the losers in the new economic paradigm. Silicon Valley may be a ‘happy valley’ but it’s not that easy for the rest of the planet to achieve incredible wealth and personal fulfillment.

It’s an elitist model of happiness - Tony invokes Abraham Maslow’s hierarchy of needs, appropriately, because Maslow was a key figure in the ‘human potential’ movement which influenced Esalen and fed into Silicon Valley’s happy culture. But whenever anyone invokes Maslow’s pyramid of needs, you can bet they think they are at the top of it - the elite, the chosen ones, the beautiful people, the TED superheroes.

Zappos was bought two years ago by Amazon. Tony sold the company to preserve its unique happy culture. Amazon follows a similar economic model - the warehouse and website, without any stores or face-to-face customer interaction - but it does it without any of the happy evangelism. It is, in fact, a ruthless company. It made £3bn in profits in the UK last year, and didn’t pay any corporate tax. That’s at least partly how it beats the competition and drives bookstores out of business. Tony talks about the importance of aligning the company’s values with its shareholders - but he says: ‘Amazon has a completely different culture to us. A Zappos employee wouldn’t do well at Amazon, and vice versa.’

Few of the Zappos employees got a say in whether the company should be sold to Amazon. For all the happy culture, it’s still run by its biggest shareholders. It’s still a power structure, where you can be fired if you don’t fit in with the boss’s utilitarian values. And the model of happiness it’s delivering is still, basically, happiness through consumption, status, wealth and power. Isn’t it?  That model works fine if you're young, beautiful, entrepreneurial and incredibly rich - but what if you're not?

Anyway, thank you to the lovely people of the new economics foundation for organising the event, which was really interesting (sorry I'm so cynical, I'm on board in general just a bit of a backseat complainer!) nef are launching a new 'happiness at work' survey, and have a consulting arm to advise companies on how to become happier, which I believe works with Zappos' own consultancy arm, Delivering Happiness At Work.