Q&A: Zappos CEO Tony Hsieh

Tony Hsieh talks about leadership, hiring mistakes and his $350-million personal investment in Las Vegas' downtown.
October 17, 2012

Zappos CEO Tony Hsieh has big plans for Las Vegas. 

As he moves his online shoe company from suburban Henderson, Nev., to downtown Vegas next fall, he's investing $350 million of his own money to transform the city. Zappos' 1,500 employees won't take over the old City Hall building until Fall 2013—after a $40-million renovation funded by Zappos. However, Hsieh is already busy at work allocating his $350 million personal investment—$200 million to real estate and residential, $50 million to tech startups, $50 million to small businesses and $50 million to arts and culture. 

It's an ambitious plan, and he's betting his legacy on it. 

We recently spent a week in Las Vegas with Hsieh and his colleagues at Zappos and Downtown Project, touring the city and meeting the talent he has recruited to carry out his vision.

Below is a transcript of one of our conversations, slightly edited for clarity.

Aimee Groth: Why did you decide to move Zappos' campus downtown?
Tony Hsieh: It was surprisingly hard to find somewhere you can house everyone under one roof, and have enough land to expand upon it. Then the City Hall opportunity became available. So that was one thing. Separately from that, a bunch of us Zappos employees, myself included, discovered the Fremont East area. It was almost too good to be true that it was a few blocks away from Michael's bar and all of that.

AG: Is Michael Cornthwaite, owner of the Downtown Cocktail Room, the reason you decided to invest $350 million into Las Vegas?
TH: Originally, we were just saying that we needed to move into any plot of land, anywhere. We'd just build our own campus like Google or Apple or Nike. Michael's the one who said, "You should really think about downtown." Apple and Nike have great campuses for their employees, but they're not integrated or contribute to the community around them. They're kind of like these little islands. And so, Michael convinced us not to do that.

AG: How did Amazon respond to your proposal? (Amazon bought Zappos in 2009 for $1.2 billion.)
TH: They knew we were running out of space, and that we had to do something. What really helped us was that coincidentally by timing, they had just moved into their new campus in Seattle when we started discussions about wanting to move downtown.

AG: What did Jeff Bezos say?
TH: He thinks that we're being a lot more conscious of integrating the neighborhood and the community into everything we're doing, whereas their initial thought was, we'll just plot this here and whatever happens happens around it. Every time the size of a city doubles, productivity and innovation per resident increases by 15 percent. Whereas whenever companies get bigger productivity generally goes down. 

AG: What makes you so influential?
TH: Personally I cringe at the word leader. It's about letting people do what they're passionate about and putting them in the right context or setting. They're the ones doing the hard work.

AG: When Zappos relocated from San Francisco to Las Vegas, you convinced most of your employees to make the move. How did you pull that off?
TH: That was 2004, and we were all young, had nothing to lose, and thought, if it doesn't work out, we can always move back. We thought we'd try it out for six months and then see what happens.

AG: You made a lot of money at a young age. What's your advice to other young entrepreneurs?
TH: Do what you're passionate about. Do it for the passion, not to make a lot of money. And passion is what's going to get you through the tough times. Every business has its up and downs.

AG: What leaders do you look up to?
TH: I don't know if there's any one person. I like reading a lot of books and meeting a lot of people. It's always being open to whoever you meet, and then you just learn a lot from exposure to different people.

AG: How do you stay motivated?
TH: By making sure I'm only working on things I'm interested in. [Otherwise] I just stop doing stuff. 

AG: What's your biggest failure?
TH: Hiring mistakes. If you add up the cost of all the bad hires, the bad decisions they made, and if they went and hired their own bad hires, the cost of all those. In the history of Zappos bad hires have cost us well over $100 million.

AG: How have you corrected that?
TH: In the early days, there was always a temptation to hire fast. And then it's always hard to fire someone. Usually you fire slowly. So we try to flip it and hire slowly and fire fast.

AG: Many CEOs say it's lonely at the top. Do you feel that way?
TH: We're structured a lot less hierarchical, so we're a lot more flat. We try and decentralize a lot of the decision making. We all hang out with each other, at all different levels.

What do you think of Hsieh's plan to transform Las Vegas' downtown? Leave a comment below.