Shoes, Booze and the Pursuit of Happiness (Pt 1)

Pushkin. Tony didn't think he needed rehab. Some of his friends insisted that he did, and he had agreed reluctantly to check himself into a luxury clinic in Park City, Utah. But what exactly had he been doing that concerned those friends. He called Tyler from the rehab place and asked him to make a list. Tyler had two roles in Tony's life.

He was an employee at Tony's company, and he was Tony's friend. After less than two weeks at the clinic, Tony decided he'd had enough and checked himself out. He met Tyler in a nearby coffee shop. Now, what's on this list? You said you could find a cure for COVID, said Tyler. That was ambitious, for sure. It was early in twenty twenty. COVID was just beginning to upend the world.

But it's no bad thing to be ambitious, especially if you have a track record of success, as Tony did. Tony was a tech entrepreneur CEO of the online shoe retailer Zappos dot com. He was worth about a billion dollars. Why shouldn't he have big ambitions? You said you could solve world peace, said Tyler. Like I said, big ambitions.

He barely slept. Not too unusual, right, Lots of successful people get by on little sleep. Tyler went on. You said you were becoming neo in the matrix. You said you could see the matrix, that you could transcend human consciousness. Said you could morph your body into a gazelle. Tyler didn't dare to look his boss, his friend in the eye.

He kept his head down, plowing on through the list. You said you could manifest water. You said you could become one with the kitchen countertop. When a reluctant Tony had first appeared at the rehab facility, they too had been unsure that he needed to be there. Residents initially presented in a thoughtful and well stated manner, it says on Tony's admission notes, but his premise began to deteriorate as he discussed his research into ketamin and how it has expanded his cognitive, physical and spiritual capabilities, including his ability to grow an additional two inches. You said you could eventually grow to be set seven feet tall, said Tyler.

The rehab center diagnosed Tony with grandiose delusions, even for a billionaire there's a point where big ambitions crossed the line into grandiose delusions. The doctor has thought Tony had crossed that line. You said, you don't need to urinate, said Tyler, because your body can recycle your urine. Tyler got to the end of the list and looked up.

Tony was looking calmly at him. All of this is key, said Tony, to exiting into the next dimension. Tyler's heart sank. It had been so hard to persuade Tony that he needed rehab, and now it seemed that the rehab hadn't worked at all. I'm Tim Harford and you're listening cautionary tales. In twenty ten, ten years before his reluctant fortnight in rehab, Tony Shay had a different big ambition. He wanted to make everyone happy. He had just published a book, Delivering Happiness.

In his book, Tony asks his readers to ask themselves a question, what's your goal in life. Maybe you'll say it's to retire early, But says Tony, ask yourself a follow up question. Why. Maybe it's because you want to travel again. Why Why? Why? Ask yourself why enough times, Tony argues, and you'll realize that your ultimate goal in life is to make yourself happy. But there's a science of happiness, and its central finding is this, we often mispredict what will make us happy. Study the science, and we can get better at being happy. When he first got interested in the science of happiness, Tony wrote it was a personal project. Then he had an epiphany he could apply it to his business. The shoe retailer Zappo's

customers told him they think of a Zappo's delivery as happiness in a box. Tony wanted his employees to be happy. The thing that ties all of these things together, Tony realized, is happiness. With his book, Tony wanted to change the world, inspiring others to join a global happiness movement by sharing the lessons he had learned. But the lessons Tony can teach us about happiness come more from his life than his book. As a child, Tony Shay always wanted to make money. To me, he recalls in his book, money meant the freedom to do whatever I wanted. After college, Tony started an internet company in San Francisco. This was the mid nineteen nineties, when the World Wide Web was still a Niche pursuit but dot com frenzy was beginning

to build. Tony sold his business and netted thirty million dollars at the age of just twenty five. He already had the freedom to do whatever he wanted. What did he want? He remembers drinking vodka and thinking, what is happiness? He went to raves, took ecstasy, played poker, and invested in other Internet startups, including Zappos dot Com. He had been skeptical at first. Would people really buy shoes over the internet without trying them on first? Yes, said the company's founder. It demonstrated this by going to his local shoe store, taking photos of their stock and putting them online.

When someone placed an order, he'd go to the store, buy the shoes, and ship them. Clearly, this wasn't a scalable business model, but it was proof of concept. As the Internet became more mainstream, there'd be money to be made by selling shoes on it. Then the dot com bubble burst, Zappo's was still far from making money, and nobody else wanted to invest. Tony emptied his bank accounts, sold his property, and gambled everything on getting Zappos through the downturn. He made himself CEO. He had realized that he wanted to be in charge. Tony cut costs by laying off some employees, but was pleasantly surprised to find that this didn't reduce the amount of work being done.

It was a big lesson, Tony recalls in his book. We realized that we'd laid off the non believers. Everyone remaining was passionate about the company. Still, Tony's cash was fast running out. He begged suppliers for extended payment terms and banks for a loan. It was like being deep underwater, he said, trying to swim up to the surface. We were worried we were drown before we could come up for air. But Tony was already preparing to make it big by reading every business book he could find. Over lunch, he asked a colleague, have you read Good to Great?

It says good companies just make money, but great companies have a higher purpose. The colleague deadpand that just making money sounded like a nice problem to have. Tony persisted, we need a higher purpose. He decided that purpose should be great customer service. Just in time, the bank agreed to the loan. Zappo's attracted new investors With the future looking brighter, Tony made a surprise announcement he was moving the company from San Francisco to a suburb of Las Vegas.

All the employees had to decide moved five hundred miles from their families and friends or lose their job. Most decided to keep their jobs. Once again, Tony had found a way to shed the non believers. The biggest benefit of moving to Vegas, recalls Tony, was that nobody had any friends outside of Zappo's. We hung out together during almost all our waking hours. Where other companies talked about work life balance, Tony talked about work life integration. When Zappo's hired new people, it looked at their cultural fit.

At first, this simply meant would Tony enjoy drinking shots with them? But as Zappos grew bigger, it needed a better system. Tony got the answer from another business book he had read, Tribal Leadership Define the Company Culture. In a list of core values, he chose ten, such as build a positive team and family spirit. He made clear to his employees that he expected them to live their lives by the ten core values. In his book, he tells the story of an employee whose spouse died, and her first instinct was not to call a member of her actual family but work. She says, that made me realize the strong connection I felt with the Zappo's culture.

Is it wise to get this attached to your employer. One thing about actual families is that they don't tend to fire you when times get tough. In the two thousand and eight downturn, Tony fired eight percent of the Zappo's family, then emailed those who remained about how the experience actually showcased the strength of the bonds they'd built.

It was heartwarming, he said, hearing stories of employees and ex employees getting together for drinks. After the layoffs. People started to say that Zappo's wasn't so much a workplace as a cult. Tony didn't mind. His book, quotes another employee. If a cult revolves around making people happy, I'll sign up anytime. Cautionary tales will be back after the break.

Tyler Williams had moved to Las Vegas to be a drummer with a band. The band didn't work out, but Tyler and his wife liked living in Las Vegas, and Tyler's wife had found a job marketing energy drinks, so they decided Tyler should look for other work in the city. Why don't you apply to Zappo's, said his wife. She'd just visited the Zappo's office and she'd never seen anything like it. There was an open bar for employees, not just energy drinks, but vodka and whiskey. People answered the phone dressed as pirates or spider man. Plants dangled from the ceiling. Cubicles were festooned in streamers and silly string.

Employees were racing toy cars. Once a year, on Bald and Blue Day, everyone shaved their heads and painted Zia Zappos on their cheeks in the corporate shade of blue. Tyler's wife thought that Zappo's was a very Tyler kind of place. It's like an adult daycare, she told him. I feel I could drop you off there and be comfortable that you'd stay out of trouble. But the Zamy workplace culture was widely known. ZA had so many applicants for every job, they said it was easier to get into Harvard. How was Tyler going to make his applications stand out from the crowd. He sent them a video.

Hey, Zappos. My name is Tyler, and I'm trying to get a job with you guys. So what I did is I wrote a little song based on your guys's ten core values, performed it, recorded it, and then we made a little video for you guys, and I hope you enjoy it.

Seven versions of Tyler fill the screen on the drums at a keyboard on guitars, Maracca's fiddling with a Rubik's Cube. It's a family that loves to play, sings Tyler, while text on the screen says value number seven. Build a positive team and family spirit.

All my insecurity.

You can be a little weird if you're humble, sings Tyler. Core Value three fun and a little weirdness, core Value ten, be humble. Tyler sent in his video, and ten minutes later his phone rang. It was Zappo's. He was in. Like all new Hires, Tyler started with a training program that covered the company's BCP that's brand, culture, and pipeline.

One way to progress through the pipeline was taking classes in Tony's favorite books core Value five Pursue growth and learning. Then, like all new Hires, Tyler was given the offer two thousand dollars to quit his new job before he'd even started. This was a tactic based on that lesson Tony had learned about how non believers are a drag on the company.

It was well worth two thousand dollars to weed out any trainee who didn't love the culture. Tyler did love it. He started out in the COLT. That's the Customer Loyalty Team, otherwise known as the call Center. On Halloween, Tyler came to work in an elaborate centaur costume. Tony approached him, what are you doing tonight? There's a Halloween parade in Vegas.

Want to join me on the Zappo's float. I can't, said Tyler. I'm playing with my new band. Tony wordlessly walked away, and Tyler kicked himself. I've missed my chance to hang out with the boss. That night, as Tyler's band played to a sparse crowd on a backstreet, the Zappo's float parked up then a double decker bus, and out came Tony and dozens of employees. They stayed and danced and parted. It was such a nice thing to do, Tyler remembers, a really kind thing to do. I was just a call center agent, and there's a hundred stories of how he would do things like that for people, things that make you go from I respect this guy to I love him. Most call centers train their workers to stick to a script, then get through calls as

quickly as possible. Tony asked his workers to develop a PEC with customers that's a personal emotional connection. One woman called to ask about shoes and then said, the worker we got chatting about her sister. They chatted for over five hours. Tony thought this was wonderful. Core value one deliver wow through service. You see, he'd liked to say.

Zappo's isn't an online shoe company, It's a customer service company. Don't stress about selling shoes, just deliver the wow. Tyler progressed through the pipeline to become the company's fungineer in charge of brand Aura. He also became Tony's friend and one of the few people who could keep pace with Tony's prodigious intake of alcohol, especially Fernit Branca and Italian di Justife. When someone asked Tyler what he wished he had known before he applied for a job at Zappo's, he offered a bromide about how busy it is, and then said the amount of furnit, Brancer, I'd be drinking. Seriously, we drink a lot of it. Tony got in interested in the science of happiness and decided to write a book of his own. He took just two weeks, powered

by headache pills and coffee beans soaked in vodka, to be happy. Tony wrote, you need four things. One a sense of purpose. This could be, for example, giving great customer service. Two a sense of connectedness with others like coworkers, work life integration. Remember. Three a sense of perceived control.

Tony explains how Zappo's links training to pay so employees feel in control of what they can do to earn a pay rise. And four a sense of perceived progress the ability to get promoted up the hierarchy. A four point framework for happiness and work could provide all four ambitions for Zappo's became more bold and enigmatic long term.

He mused, it's not even about e commerce necessarily, it's about an experiential brand that's really about making people happy. What exactly did Tony mean. It's not clear to me, and it wasn't clear to Tony's board of directors or investors. They thought they invested in an e commerce company that aimed to make money selling shoes. The board began to mutter dismissively about Tony's social experiments. Tony began to worry that they might force him out as CEO, so he made a deal with Amazon. Amazon bought Zappo's, Tony's investors got their financial exit, and Tony got to stay in charge, running things his way. It's easy to see why the board of directors might have rolled their eyes at Tony's social experiments, the five hour phone calls, the cult like atmosphere,

the endless acronyms, the open bar. Then again, you can also understand why Amazon agreed to let Tony stay as CEO. Zappo's was doing well. The economist and author John Kay has for decades been a wise observer of corporate success and failure. Kay writes about the profit seeking paradox. The more explicitly a company makes profit its focus, the less profitable it tends to be. Kay gives the example of Boeing when it launched the seven four seven. A director asked about expected return on investment. Ah, yes, came the reply, I think someone did look at that, but I can't remember what they found. Owing's bosses didn't really care. They just wanted to make a cool airplane, and they trusted that if they succeeded, the return on investment would probably

take care of itself. Later, a new CEO took over and announced that everyone would have to change their focus, think less about the coolness of airplanes and more about maximizing shareholder returns. The result, Boeing's planes started to crash, and of course, so did Boeing's profits. That's the paradox, says Kay. The best way to make profits might actually be to encourage your employees to care about something else entirely, something like spreading happiness. Crazy as it might have seemed, maybe Tony was onto something. In his book on Happiness, Tony boasts about Zappo's reaching number six in Fortune magazine's annual list of the one hundred best companies to work for.

But five years after the book was published in twenty fifteen, Zappo's had slipped down the rankings to eighty six. The next year, it dropped out of the top one hundred altogether. Zappo's employees it seemed were no longer so happy? What changed? Cautionary tales will be back in a moment. On Necker Island, Richard Branson's private retreat in the Caribbean, Tony Say is giving a talk to a small group of fellow invitees, mostly other business leaders. He's not talking about happiness. He's talking about another big new idea that also begins with h Holacrasy. He's explaining his quest to turn Zappos into a self managing organization. It's not easy to explain Holacrisy looks so different from traditional corporate organization that business leaders

find it hard to get their heads around. There are no managers, no departments, no job titles. Instead, there are roles and circles. Your org chart changes every day. What's an org chart? Says one of the people listening to Tony's talk. Tony's surprised to get such a basic question. Surely every business leader knows what an org chart is.

But the questioner isn't a business leader. She's the folk singer Jewel, who's also at the retreat on Necker Island, explains the idea of an org chart, and Duel follows up so you're saying it's like the human body, says Duel. The different parts of the body, the liver or the kidneys, don't need managers to tell them what to do. They just know what to do. And because they're imprinted with the same genetic code, they do what's good for the body.

And you're saying, you're to make Zappos like that, and your ten core values are like your genetic code. Tony is amazed. Yes, yes, Jewel's explaining helacrisy better than he can. He invites Jewel to a meeting for all Zappo's staff, where she recounts hearing Tony speak on Necker Island.

And what I was hearing him described was a company as a living, breathing organism that was given life, breathed life through its values and what its purpose was. It wasn't about shoes, And I found that really fascinating. It made me want to pick his brain more.

Jewel and Tony sit on the stage and chat about nature and fractals and entropy and how holacrasy is like a body. But also Tony adds how it's like a rainforest and a city.

There's no ceo of the rainforest, but the rainforest is self organized. And another city fun fact I like to share sometimes is that in all of Manhattan there's only something like three days of food supply, but there's no central food planner, but the system's amazingly resilting.

If rainforests don't need a CEO, why should corporations? If Manhattan can self organize, why can't Zappos. In practice, though the implementation of Holacrasy was not going well, Tyler Williams remembers when rumors first spread around Zappo's that the h R Department was piloting some strange new ideas about self organization, another one of Tony's weird experiments. Everyone shrugged indulgently, but soon an email landed in their inboxes. Tony wasn't waiting for the results of the pilot. He was going to rip the band aid and impose Halacrasy across the whole company.

Everyone would have to learn the Halacuity Constitution, which was full of capitalized words like partner and role and accountabilities. A partner Julie Fillinger role shall regularly compare the current expression of such roles, purpose and enactment of its accountabilities to such partner's sense of an idea potential, expression of such purpose, and enactment of such accountabilities to identify gaps between the current reality and such a sensed potential. Each such shall identified. Such partner shall attempt to reduce such tension by identified courses of action, given the authorities and other mechanisms available to such partners under this constitution. The Halacracy Constitution laid out rules for employee interactions. If someone

raised a tension, capital t then their circle held a tactical meeting to process that tension. No small talk aloud, Everyone spoke strictly in turn. There'd be an amend and clarify round, an objection round, and then a clarification of the tension and reactions. Tony abolished job titles. If you'd worked hard enough to be come a manager, tough luck, you weren't a manager anymore. Everyone had to find new roles to fill in circles to earn people points. Too few people points, and you'd be sent to the beach, a kind of purgatory where you had two weeks to find more rolls and points where you'd be fired. None of this sounds very much like how the kidneys work with the liver or like a rainforest or Manhattan. Nor

did it sound like it had anything to do with the four point framework for happiness that Tony had laid out in his book just a few years before. Happiness relied on a sense of perceived progress. Tony had said, the ability to get promoted up the hierarchy. That's hard when there's no hierarchy. Happiness relied on the sense of received control. Tony had said, the knowledge that if you did certain things you get a pay rise. Under her Lacrasy, nobody at Zappo's had any idea how their new roles would translate into salaries. Don't worry, said Tony, We'll figure it out. Three years later, they were still trying. Tony brought him consultants to help manage the organizational change. One described a moment of realization. I'd been speaking to everyone

on a high level, she said. Then I realized they don't care if Zappo's changes the world with their new management system. They want to know if they're going to get a paycheck next month. Faced with discontent, Tony reached for his old trick of getting rid of the non believers by offering every employee money to quit. Nearly one in five took him up on it. Some complained in the exit interviews about shiny buzzwords and half baked ideas.

Those who remained at Zappo's stopped telling Fortune magazine that it was a great place to work. Tony Say wrote a best selling book about the importance of making employees happy, then imposed a management system that made many of them miserable. Why It's a puzzle, but Tony gave us a clue to the answer in his book. If you ask anyone why they're doing what they're doing, you'll find it's ultimately because they want to make themselves happy. Tony must have once thought that spreading happiness would make him happy. Then he decided that imposing halacrisy would make him happy. I think what really made Tony happy was being at the bleeding edge of the latest management thinking with it it's half baked ideas and shiny buzzwords, purpose culture core values.

Tony loved the kind of big ideas you'll find neatly packaged on the shelves of airport bookstores or in ted talks or stage discussions with famous folk singers. Join my global happiness movement make corporations like a living, breathing organism. There's nothing wrong with big ideas. Of course, ideas are great.

You'll find my own books in airport bookstores. I've given Ted talks, I've even spoken at a retreat on Necker Island. But when listening to a really spellbinding talk, it's all too easy to get carried away. High level ideas, neatly packaged and a punchy talk can give you a buzz like a shot of Fernet branca. They're intoxicating. But as someone who's tried to give those talks, I know that to make them engaging you need to leave out all the crunchy detail. What sounds amazing on the stage or the page isn't always easy to put into practice. You need to really think the details through and how they apply to you. And that's sober work. Tempting instead to try to keep the buzz going. Pick up the next

airport bestseller, click on the next Ted talk. It's like downing one intellectual shot after another. You might not then notice that your latest exciting big idea doesn't necessarily cohere with your previous big idea, or even make much sense on its own terms. If you look more closely take happiness.

Tony tells us in his book about the Central Insight of the Science of Happiness that we mispredict what will make us happy, But he doesn't dwell on one of the most common mistakes. We tend to overestimate the long term boost to our happiness of acquiring new possessions, like a new pair of shoes. We might get happiness in a box at first when we open a Zappo's delivery.

Soon though, we'll revert to being about as happy as we were before, just with more shoes. No wonder Tony was so fond of those vague descriptions of Zappos as a customer service company or an experiential brand. Once you admit that it's an e commerce business that sells shoes, the mission of delivering happiness starts to feel as empty as a discarded shoe box. As Zappos struggled with Halacrisy, Tony introduced yet another, a big new management idea called MBD that's that doesn't really matter what it stands for.

Tyler Williams was feeling unwell, suffering from nausea and heartburn. How much do you drink? His doctor asked, Tyler detailed his consumption of Fernet Branker. There's your problem, the doctor said. Tony was drinking even more. If Tyler tried to keep up shot for shot, he'd pass out. When a friend gently asked Tony why he felt such a need to drink, he said, it's the only way I can live in the now. But Tony agreed to look into alternatives. He read more books, watched more Ted talks, and decided he could cut back on alcohol with the help of other substances psychedelics and which is an anesthetic and hallucinogen. Tony's ideas became bigger and hardly baked at all. He wanted to solve world peace. He wanted to grow to become

seven feet tall. He wanted to transcend the matrix. As a child, Tony had thought that money meant the freedom to do whatever he wanted. As an adult, he had become obsessed by the quest for happiness and big ideas. He didn't really think through. One of those ideas would now lead to tragedy. We'll pick up the story next time on Cautionary Tales. Key sources for this episode were happy at Any Cost, The Revolutionary Vision and Fatal Quest of Zappo's CEO Tony Shay by Katherine Sayre and Kirsten grind and wander Boy Tony say Zappo's and The Myth of Happiness in Silicon Valley by angel O Young and David Jeans. For a full list of sources, see the show notes at Timharford dot com. Cautionary Tales is written

by me Tim Harford with Andrew Wright, Alice Fines, and Ryan Dilly. It's produced by Georgia Mills and Marilyn Rust. The sound design and original music are the work of Pascal Wise bend A. Dafhaffrey edited the scripts. The show also wouldn't have been possible without the work of Jacob Weisberg, Greta Cohne, Eric Sandler, Carrie Brody, Christina Sullivan, Kira Posey, and Owen Miller. Cautionary Tales is a production of Pushkin Industries.

If you like the show, please remember to share, rate, and review. It really does make a difference to us, and if you want to hear it, add free and receive a bonus audio episode, video episode, and members only newsletter every month. Why not join the Cautionary Club. To sign up, head to patreon dot com Slash Cautionary Club.

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Shoes, Booze and the Pursuit of Happiness (Pt 1)

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