The Zappos Way of Managing

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Jake Chessum

STANDING BY Call center reps are urged to be themselves while working the phones.

I first met Hsieh three years ago at a cocktail hour at the Inc. 500 conference. (Zappos had landed at No. 23, with revenue of $135 million.) We spoke for 10 minutes or so, and I remember being struck by the scope of his achievement. But I was even more impressed by the oddness of Hsieh's mannerisms.

Hsieh is hard to know and even harder to read. He's generous and smart, but so subdued in one-on-one conversation that it's easy to mistake his reticence for rudeness. When he does speak, it's in full paragraphs that sound as if they have been formulated in advance. He sometimes smiles -- as he does when he's explaining the clever way Zappos manages its call center -- but he doesn't laugh at other people's jokes and seldom tells his own.

And yet, this mild-mannered fellow leads a company that is entirely uninhibited. Interviews are held over vodka shots, bathrooms are plastered with "urine color" charts (ostensibly to ensure that employees are hydrated but also just to be weird and funny), and managers are encouraged to goof off with the people they manage. Zappos's 1,300 employees talk about the place with a religious fervor. The phrase core values can prompt emotional soliloquies, and the CEO is held with a regard typically afforded rock stars and cult leaders.

Hsieh tries his best to keep up with the goofy, libertine culture. Every day, he blasts a steady stream of playful messages to 350,000 people on Twitter. (Before taking the stage at a conference earlier this year, he posted this missive: "Spilled Coke on left leg of jeans, so poured some water on right leg so looks like the denim fade.") He has also become an accomplished public speaker who spends a good chunk of his time on the road giving talks, which are delivered without notes.

What most of Hsieh's admirers -- and even some Zappos employees -- don't know is that this openness doesn't come naturally. Hsieh has been exceptionally shy all his life and finds meeting strangers exhausting. (His trick to get over his shyness is to pretend he's interviewing you for a job.) Those seemingly off-the-cuff Twitter missives? He spends 10 minutes or so carefully composing each one. He takes his employees out to restaurants and bars not because he loves nightlife but because he thinks it sets a good example. "I just want to have a company where people can hang out together," he says, "and then come in to work the next day and not worry about whether they've done something stupid." Most CEOs make their companies in their own image; Hsieh seems to have designed his company to behave the way he wishes he could.

Hsieh has always been a little different. He grew up in San Rafael, California, and excelled from an almost creepily young age. In first grade, he taught himself to program, playing with a Radio Shack microcomputer that his father, Richard -- a Chinese-born chemical engineer with a Ph.D., an M.B.A., and 29 patents to his name -- brought home. The next year, Richard blew a month's salary and bought his son an IBM XT personal computer. By third grade, Hsieh's bedroom was littered with pages of software code for a bulletin board system -- a precursor to today's Internet message boards, accessed by dial-up modem -- that he ran for several years, tying up the household phone line and mystifying his parents. "He stayed in his room for hours at a time," says Richard Hsieh.

Hsieh started his first company, LinkExchange, shortly after graduating from Harvard with a degree in computer science. The company allowed amateur Web publishers to barter for advertising by agreeing to publish one another's ads. "It was just something to keep busy," he says. "But within a week, we knew we were onto something." In three months, Hsieh signed up 20,000 websites; he decided that the site could make money by selling ads as well as trading them. Though Link-Exchange was unprofitable, the idea had enough steam to pick up a $3 million investment from Sequoia Capital -- Moritz led the investment. By 1998, the company, which had revenue of about $10 million, would be sold to Microsoft for a staggering $265 million. Hsieh was just 24 years old.

And yet, despite this success, Hsieh found himself depressed. "The easiest way to explain it was that going into the office started to feel like work," he says. He felt increasingly that the people he had hired were not committed to the venture's long-term growth. "The Silicon Valley culture is, 'I'm going to work hard for four years and make millions of dollars and then retire,' " he says. Work, which once had felt liberating, had become a chore. He resolved that his next company would not be about a short-term payday. It would be about long-term growth, about creating a place to which he and his employees would want to come every day.

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Max Chafkin

Senior writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York.

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