Zappos.com CEO Tony Hsieh named the ‘smartest’ in town

After a long debate, VEGAS INC has chosen maverick Tony Hsieh as its first business honoree

THE CRITERIA

When VEGAS INC decided to pursue its first ever The Smartest Dude In Town special issue, we knew it would be controversial. How could it not be? The inherent drama notwithstanding, we hope this becomes an annual event every Labor Day, where we take stock of where the business community stands and who best exemplifies all that is good and effective and important about Las Vegas business.

VEGAS INC used several metrics when reaching the decision. First, we asked: Is the person successful in Las Vegas, and perceived to be successful by his or her peers? Is this business leader doing something truly innovative with his or her business? The nominee also had to exhibit marketing savvy with global reach—influence and recognition beyond Las Vegas. In simpler terms: If VEGAS INC had to select one individual to place in a time capsule that best represents the pinnacle of Las Vegas business in 2011, who would that person be? After many months of long, spirited discussions, VEGAS INC tapped Tony Hsieh, CEO of Zappos.com, as our selection this year.

Steve Wynn will be VEGAS INC’s first inductee into The Smartest Dude In Town Hall Of Fame for exemplifying our criteria throughout the course of his long, decorated career in Las Vegas. With Wynn’s selection, we expect no such controversy to ensue (but you never know).

—The Editors

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Zappos.com CEO Tony Hsieh

There’s really no doubt that Tony Hsieh, ubiquitous in the national media these days, is one incredibly smart dude. His relatively nascent business, Zappos.com, had gross sales in excess of $1 billion last year. If diversification in business is the key to Las Vegas’ future, nongaming and nontourism executives such as 37-year-old Hsieh (pronounced SHAY) will clearly be the ones to lead the way. Luckily, in Hsieh, a guy who’s reported net worth is upwards of $400 million, we’ve got someone who’s excited to be up to the task.

Last month, Tony Hsieh appeared on Comedy Central’s megahit, The Colbert Report, to talk about his company’s expansion from shoes into clothing and other items. As always, host Stephen Colbert cuts to the chase at the start of the interview: “How do you sell happiness?” Colbert asks in his signature mocking tone, referring to Hsieh’s book, Delivering Happiness. “I’ve been told money can’t buy happiness. I’ve long suspected that was a lie.” The audience laughs. “You’re telling me I’m right?” Hsieh, clad in his signature jeans and button-down shirt, is ready for Colbert’s faux-onslaught. Hsieh says, simply, that happiness is his company’s business model. Happiness for employees, customers, everybody really, begets productivity, satisfaction and increased sales.

Customer service has long been key to Las Vegas’ success—think casino and hotel rewards programs—and Hsieh takes the concept to a whole new level. Consumer loyalty isn’t just important to Zappos.com—it’s everything. And you don’t have to be a card-carrying member to benefit from it, or as Hsieh would say, to get “WOW” in every shoe or clothing box. But, come on, how do you deliver WOW, exactly? Colbert demands to know. Hsieh explains that loyal, return customers who buy from Zappos.com sometimes get a surprise upgrade to overnight shipping—a simple, but very delightful surprise for shoe lovers. “A lot of people order as late as midnight Eastern, and the shoes show up on their doorstep eight hours later,” Hsieh says.

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PILOT PROGRAM: Hsieh closed a deal, to be announced mid-September, for a project that would fly small jets back and forth from the Bay Area to Las Vegas.

The audience goes wild. “Wow!” Colbert says, peering over his glasses. “Exactly,” Hsieh says, smiling.

Happiness is our business model. Has a nice ring to it, no? And in a city founded on creative ways of making fun, happy experiences for core customers—tourists—that model seems to be a perfect fit. Hsieh might even be the key to Southern Nevada’s dream of business diversification. Having made large profits in a town struggling to recover from the Great Recession, it’s clear this smart dude is onto something. Something big.

It’s no secret that the crux of what makes Zappos.com tick is its strange community culture, Hsieh’s brainchild. Hsieh doesn’t inhabit an office. Rather, he sits among his employees, and decorates his desk with the best of them—complete with jars of pimento-stuffed olives and an upside-down Nevada license plate that reads: ZAPPOS. Hsieh is a smart dude for sure, but he’s also more than a little crazy in the best possible way. In Delivering Happiness, Hsieh describes the importance of having a “tribe,” people with whom you have important, personal connections. He’s an innovator in business culture. The sense of connectedness is crucial to being happy. And if you care about who you work with, you’ll be more likely to feel like you’re part of a team, working toward a common goal. So, he created the corporate culture for his company based on those relationships. Zappos has an extensive screening process that makes certain all employees fit in to its singular corporate environs. They’re seeking a culture match. Just as important as their college and graduate degrees and their work experience is their ability to fit into the company. They have to “create fun and a little weirdness.”

A day in the life of Zappos.com (1-23-2009)

Fashion buyer Jennifer Sidary snaps a photograph of coworkers walking by her desk at the corporate offices of Zappos.com in Henderson. The online retailer's relaxed, fun-loving and close-knit family atmosphere has won over employees, investors and industry watchers alike. Launch slideshow »

Founded in 1999, Zappos.com (named from a variation of the Spanish word for shoes, zapatos) moved to Henderson from San Francisco in 2004 with 70 employees. Now the company has more than 1,200 employees and plans to hire as many as 800 more by the time it relocates to the Las Vegas City Hall building downtown in 2012.

Unexpectedly, Hsieh invited me to come to the company’s quarterly “All Hands” meeting, where more than 1,000 employees were in attendance. I felt a little bit like a kid at my first day of school: Excited, nervous and a little out of place. What struck me instantly was the level of trust among the employees was palpable. Hsieh, their clear leader, appears to be staggeringly kind with everyone. There were inside jokes that only Zapponians, as they call themselves, would understand, and everyone knew everybody else. It’s a tight-knit culture, to say the least.

Zappos.com was bought by Amazon.com in 2009 for $928 million, in a total deal that was valued at some $1.2 billion. As a post-buyout CEO, Hsieh could easily take his shares and run. But he makes it clear that he has no intention of leaving the company he lives and breathes. He’s too tight with his tribe, Besides, Amazon is largely a hands-off owner and the business growth potential truly excites him.

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BILLION-DOLLAR DEAL: Zappos.com was bought by Amazon.com in 2009 for $928 million, in a total deal that was valued at some $1.2 billion.

“At the end of the day, Zappos ships shoes online. You can argue that isn’t very sexy,” says Eric Ryan, co-founder of Method Home Products. “But Hsieh has elevated everybody’s work to a much more meaningful purpose. That’s such a rare and powerful thing.” Zapponians don’t just drink Hsieh’s Kool-Aid, they live it every day, willfully and gleefully. “Most CEOs tend to be strong operators, but he’s a strong operator and a strong visionary,” Ryan says. “He’s just a fresh model of what a modern businessperson should be—no ego, and in it for the right reasons.”

Tony Hsieh’s life is as normal as a business tycoon’s life could ever be normal. He starts his mornings downing an espresso at a Las Vegas downtown mainstay, The Beat Coffeehouse, which is located down the road from the future location of Zappos.com’s headquarters—a convenience that’s not lost on the CEO. The company will be moving all of its employees from its Henderson offices (with some 170,000 square feet of space) to shiny new downtown Las Vegas headquarters and its massive 300,000 square feet of space in 2012. And it got the space for cheap. Really cheap: $18 million, which was $7 million less than the initial $25 million price tag from the city. He managed to snag that price because Tony Hsieh is Las Vegas’ chosen one, at least for now, and the city doesn’t want to lose him. But it becomes clear, early on in our conversation, that other than the financial deal, Hsieh is an advocate of downtown Las Vegas. He lives in The Ogden. He likes the drinks at Downtown Cocktail Room, where he enjoys his Grey Goose and sodas, thank you very much.

“Gold Spike is actually surprisingly good and super cheap. I love baked potatoes,” Hsieh says, laughing.

The hopes of downtown Las Vegas’ revitalization—something that has been in the works, um, forever—are now hinged up on Zappos.com’s off-center, energetic employees. Hsieh is predictably modest about what his company’s relocation will be able to do for downtown, but it’s clear that city officials, including Las Vegas Mayor Carolyn Goodman and her predecessor and husband, Oscar Goodman, feel differently. The city needs more Tony Hsiehs and more Zappos.coms. Well, yeah.

Carolyn Goodman calls the Zapponians a “creative class,” which seems an apt description for people hired based at least partially on their weirdness quotient. “An infusion of young, creative people who really want to live and work here, that’s a huge plus for the city,” she says. We as a community in Southern Nevada have been so dependent on tourism. Those of us who live here, obviously need to support tourism as strongly as we can, but we also need a diverse economic community.” Goodman isn’t shy about saying she thinks that Zappos.com, as well as the Cleveland Clinic Lou Ruvo Center for Brain Health and the long-awaited Smith Center for the Performing Arts, will serve to stimulate downtown’s economy and spur diversification throughout, not only her city, but all of Clark County.

With the Nevada Development Authority doing little to spur economic development and the Las Vegas Conventions and Visitors Authority continuing to market our city as solely an adult playground (what happens here, stays here), Las Vegas could use a capitalist savior or two. And it just may have one in Tony Hsieh.

Internet start-up and Las Vegas aren’t words that typically go together. But Hsieh’s vision in all things high tech is exceedingly valuable to a city that woefully lacks diversity in its business portfolio. Hsieh says he wants downtown Las Vegas to become an incubator for high-tech firms. Unlike city officials, Hsieh has successfully sought Bay Area tech firms who might be interested in relocating. Hsieh closed a deal, to be announced mid-September, for a project that would fly small jets back and forth from the Bay Area to Las Vegas to get more educated, innovative, smart-dude, techie-types in Vegas more often. It’s happening, folks. Hsieh and his tech-exec buddies just might become the silver bullet that nudges Las Vegas out of this Great Recession. Because, as we’ve already seen, our key industries of gaming, tourism and real estate aren’t going to do the trick on their own. At least not in the immediate future.

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Zappos.com CEO Tony Hsieh poses with some of his company's merchandise.

British author and TechCrunch columnist Paul Carr says of Hsieh’s grand, social experiment: “Tony Hsieh is someone with the will, the vision, the connections and the capital to get stuff done. He’s clearly decided this is his next big project—and the one that defines him as an entrepreneur for social good. If he fails, it won’t be for lack of trying. The role of Zappos is hugely important. Unlike most revitalization projects, there’s no need to hope that if you build it, they will come. Tony is both building it, and bringing the people to make it work.”

So perhaps the city is right to rely so heavily on such a smart dude for something like its current downtown redevelopment. Hsieh already has a number of what were once pie-in-the-sky projects lined up for the already-hip area, including a charter school, gym, dog park, urban garden, bike sharing programs, tech library, community kitchen with celebrity chef Jamie Oliver and much more. “With all of these projects, it’s asking people: What are you passionate about that can help build this community and make this a place where people want to live and work?” Hsieh asks logically. “It’s kind of like trying to do 50 start-up projects at once. I mean, selfishly, if I’m going to live here, then I want all of these things to be here.”

Even if a certain Zappos (and Tony Hsieh) fatigue has set in in some Las Vegas circles—yes, he’s a genius, we get it—there’s no denying that he is, right now, the smartest dude in town. And in a city full of gargantuan egos, this particular smart dude is somebody who would never, ever dream of calling himself that. Not even close. How smart is that?

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  1. Congratulations Mr. Hsieh. What a fine combination you are of business acumen and social responsibility on every level. It's just great to have you in Las Vegas and I'm sure your an inspiration to many.

  2. Congratulations, and best wishes on the success of your vision. Downtown revitalization has traction, and Zappos is part of the push that is giving it momentum. 2012 is the year many downtown projects come online; it is going to be amazing!

  3. At one Billion dollars, everything sounds hunky dory, one might think that even 50 years from now this place might still be in business, but like everything that's happening in this country, no one said anything about these people's future, you know like a private Pension! Or do all of these people intend to become Millionaires, just like the boss Hmmmmm!

  4. Honor Tony Hsieh if you like. However, no one should forget that Amazon, a publicly traded corporation, owns Zappos.com, not Hsieh. There is a legion of former Zappos in Las Vegas who found that "the happiest place to work" is not. The "company culture" pressures employees to go out drinking with one's co-workers after work, employs strippers as customer service representatives, and holds employees-must-attend vendor parties at Strip night clubs where spouses are asked to stay away. That means that Zappos.com is not a place for observant Mormons or Jews to work; it is not a place for people with children to work; it is not a place for people who are trying to further their education to work.

    Amazon has serious labor complaints against it, in every location where it has a warehouse, for oppression and abuse of workers, and is constantly fighting the unionizing of its work force. In the days of the run up to Amazon's purchase of Zappos.com, Zappos management was desperate to hide from the press the fact that it had pending against it, in the U.S. District Court, a lesbian on woman employee sex discrimination case. Zappos ultimately got that lawsuit dismissed with a very expensive law firm, by scaring away the woman plaintiff's lawyer and painting her as a lesbian...as if lesbian on lesbian sexual harassment was legally OK. It's not.

    The reality is that Zappos is not a place the vast majority of Nevadans would want to work. It is an unnecessarily hostile work environment for normal people.

    Tony Hsieh is a great computer programmer, but otherwise nothing but an inarticulate delusional con man. His "core values" are not followed by Zappo's owner, Amazon, and are little more than a promotional gimmick to sell full priced shoes and propel Tony Hsieh to his next money making icommerce start up gig.

    And despite Tony Hsieh's televised claim to Jon Ralston that he lives in the Ogden highrise in Downtown Las Vegas, he still owns his McMansion in Southern Highlands and is rarely in town.

    I hope the Las Vegas City Council does not put all of its hopes on Tony Hsieh to revitalize the area around City Hall or east of Fremont Street, because they will be greatly disappointed, since, among other things, Amazon controls the Zappos purse strings.

  5. Calling Tony Hsieh a "con man" is something the forum admin shouldn't allow - especially when it comes from someone who hides behind a name like CynicalObserver. I'm going to be cynical and assume that CO has an agenda or an axe to grind. So I completely and utterly discount his comments.

  6. Scott,

    Don't take CynicalObserver's post to serious. A simple Google search shows that most of his post comes from anonymous posts around the Internet. He has no first hand knowledge of what he states here or real facts to back it up.

    There are many people that can not stand the fact that others do well in this world and they will do their best to spout nonsense about them. That is a drawback of the Internet. He would never make these posts using his name or to the face of those he accuses.

  7. I'm not going to call Hsieh a con man, or any other perjoratives. However, he does appear to be a unmarried man in his late 20's who has set up his company culture as if the entire world is just like him. The descriptions in this article reinforce my argument. I also think that he has a shrewd understanding, and takes advantage, of the fact that a great many jouirnalists nowdays are in his age group and social demographic. I'm 53 years old; do you think community kitchens with celebrity chefs, urban gardens and bike-sharing programs have any interest for me and others in the workforce my age?
    I wonder how Hsieh deals with and understands the dregs of society? The poor, the lazy, the drunkards, the mentally ill, the middle age and older who, quite simply, think he's full of it? How is he going to sell them on his concept of happiness?
    Without a doubt or snark, I think Hsieh is a brilliant man who can do great things for the City of Las Vegas. But I also think he is not much more than a shoe salesman who has convinced people that he has a smoother system for customers. Time and legay costs will put a crimp on many of his happiness and customer is always right ideals, IMO.
    Al Bundy had a wife and children. I wonder how Hsieh would act if he had the same responsibilities?

  8. As a Zappos employee myself I can't disagree more with Cynical and JLOKC. Finally something good happens in Las Vegas. The dawn of a new era in Las Vegas and you've got to beat it down.

    What's wrong with you? I feel that Zappos should feel like the ideal workplace for anyone. Especially the 14.2% of unemployed Las Vegans and their benefits are endless. Because your jealousy for working under such a fun environment is skewed by your jealous thoughts I advise that anyone that reads the comments skips right over yours. Your thoughts are skewed, your thoughts are worthless to revitalization of downtown.

    To see someone invest even an effort in our own money rather then ask for tax payers money to revitalize a well known area (that frankly can use some sprucing) is amazing. Did tony ever ask you for a dollar? Didn't think so... please don't open your mouth and try to offend a company that is doing so much for Community. Go bark up MGM's tree if you want to discuss revitalizing a city... oh wait... they're not succeeding...

  9. I have nothing but admiration for people with great ideas to make money, I see nothing in wrong becoming a Gazillionaire, my question is, Is he going to share the wealth with the working people that are making all his money for him, You know, like in benefits that will help his labor force cope after they reach an age with pension funds that will help them all when they retire? The baby Boomers are now having to work late into their 70's and 80's because people just like Hsieh kept all the money, never shared, and believe me 401k's are just a way to save money, not meant to retire on. That my friends, is what's wrong with our country now!! WAKE UP and start asking questions.....The boomers never thought about getting old......too late!!!

  10. It also just came to me that some of the critics might just be your everyday, nothing special racists who resent an Asian-American being rich and powerful. Just sayin...

  11. So, Mr. Bourne, anyone who questions Mr. Hsieh is a racist?
    Let me be clear: I am happy Mr. Hsieh is investing in Downtown Las Vegas! I think the Beat Coffehouse is a great place and Mr. and Mrs. Cornthwaite are geat ambassadors for Las Vegas. They represent all that is good about Downtown Las Vegas. I think they are "all in" for Downtown Las Vegas. But how "all in" is Mr. Hsieh? How deep is his personal investment in the City?

    My biggest question is how he plans to deal with people who are older than he, poorer than he, and excuse me for being blunt-dumber than he? If he just wants to run them away, more power to him! Except where does he expect them to land and what does he want to do with them there?

    I want Mr. Hsieh to succeed and be 100% commited to every aspect of business and living in Downtown Las Vegas! Long live The Western!

  12. My answer to azstripper as far as spreading the wealth is that he only makes 36,000 a year.. the average Call center employee makes more.. he drives a Mazda 6 and he is very humble. I believe Tony will do great things for Downtown Las Vegas... lets not criticize someone that is going to help the area....lets lend a hand and be thankful this individual didn't up and leave like the rest of companies here in Vegas.

  13. A sample of the types of complaints about conditions suffered by Amazon's workers:

    http://www.latimes.com/business/la-fi-10...

    Of course, since the value of Mr. Hsieh's stock in Amazon has doubled in the last 24 months, while living in his fantasy land he doesn't have a clue about, or perhaps doesn't care about, the real working conditions of Amazon's employees.