← Cautionary Tales with Tim Harford
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- [00:00]
Tim Harford
This is an I Heart podcast.
- [00:02]
Dr. Maya Shankar
Guaranteed human There are moments in each of our lives that seem to change everything. An unexpected diagnosis, the sudden end of a relationship, the loss of a job. As our lives veer off course, it can feel like time is dividing into a before and an after. I'm Dr. Maya Shankar, a cognitive scientist, and my new book, the Other side of who We Become When Life Makes Other Plans, is all about how we navigate these inflection points. The Other of Change pairs singular real life stories with scientific insights to help us find meaning in the tumult of change. What if we saw the hardest moments in our lives not simply as something to endure, but as an opportunity to reimagine who we can be? I'm thrilled to share that Booklist gave the Other side of Change one of its coveted starred reviews, saying it's impossible not to be moved. The Other side of Change is out now. Get your copy today, wherever you like to buy books.
- [01:11]
Tim Harford
Pushkin. Tony didn't think he needed rehab. Some of his friends insisted that he did, and he'd 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 2020. 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 and Zappos.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. You 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. You 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, ploughing 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. Resident 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 ketamine and how it has expanded his cognitive, physical and spiritual capabilities, including his ability to grow an additional 2 inches. You said you could eventually grow to be 7ft tall, said Tyler. The rehab center diagnosed Tony with grandiose delusions. Even for a billionaire, there's a point where big ambitions cross the line into grandiose delusions. The doctors 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 to Cautionary Tales. In 2010, 10 years before his reluctant fortnight in rehab, Tony Hsieh had a different big ambition. He wanted to make everyone happy. He'd 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 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 Zappos. Customers told him they think of a Zappos delivery as happiness in a box. Tony wanted his employees to be happy. The thing that ties all of these things together, Tony realised, 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 Hsieh 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-1990s, when the world Wide Web was still a niche pursuit. But dot com frenzy was beginning to build. Tony sold his business and netted $30 million. At the age of just 25, he already had the freedom to do whatever he wanted. But 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.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. He'd 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. Zappos 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 realised 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 realised 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 would 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 deadpanned 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. Zappos 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 move 500 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 Zappos. 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 Zappos 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'd read, Tribal Leadership Define the company culture in a list of core values. He chose 10, 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 10 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 realise the strong connection I felt with the Zappos 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 2008 downturn, Tony fired 8% of the Zappos 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 Zappos 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.
- [13:45]
Dr. Maya Shankar
There are moments in each of our lives that seem to change everything. An unexpected diagnosis, the sudden end of a relationship, the loss of a job. As our lives veer off course, it can feel like time is dividing into a before, before and an after. I'm Dr. Maya Shankar, a cognitive scientist, and my new book, the Other side of who We Become When Life Makes Other Plans, is all about how we navigate these inflection points. The Other side of Change pairs singular real life stories with scientific insights to help us find meaning in the tumult of change. What if we saw the hardest moments in our lives not simply as something to endure, but as an opportunity to reimagine who we can be. I'm thrilled to share that Booklist gave the Other side of Change one of its coveted starred reviews, saying, quote, it's impossible not to be moved. The Other side of Change is out now. Get your copy today, wherever you like to buy books.
- [14:49]
Tim Harford
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 Zappos? Said his wife. She'd just visited the Zappos 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 Z for Zappos on their cheeks in the corporate shade of blue. Tyler's wife thought that Zappos 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 zany workplace culture was widely known. Zappos had so many applicants for every job, they said it was easier to get into Harvard. How was Tyler going to make his application stand out from the crowd? He sent them a video.
- [16:20]
Tyler Williams
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 10 core values, performed it, recorded it, and then we made a little video for you guys and I hope you enjoy it.
- [16:36]
Tim Harford
Seven versions of Tyler fill the screen. On the drums, at a keyboard, on guitars, maracas 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. You can be a little weird if you're humble, sings Tyler. Core value three, create fun and a little weirdness. Core value ten, be humble. Tyler sent in his video and 10 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 favourite books. Core value five, pursue growth and learning. Then, like all new hires, Tyler was given the offer $2,000 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 $2,000 to weed out any trainee who didn't love the culture. Tyler did love it. He started out in the clt, that's the Customer Loyalty Team, otherwise known as the Call Centre. 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 Zappos 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 back street, the Zappos 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 centre 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 centres train their workers to stick to a script and 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 liked to say, zappos 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 Fernet Branca, an Italian digestif. When someone asked Tyler what he wished he'd known before he applied for a job at Zappos, he offered a bromide about how busy it is and then said, the amount of Fernet Branca I'd be drinking. Seriously, we drink a lot of it. Tony got 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 co workers. Work, life, integration, remember? Three, a sense of perceived control. Tony explains how Zappos 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. Tony's ambitions for Zappos 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 meant? It's not clear to me. And it wasn't clear to Tony's board of directors or investors. They thought they'd 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 Zappos, 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. Zappos 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 747. 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. Boeing'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 maximising 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 is 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 Zappos reaching number six in Fortune magazine's annual list of the hundred best companies to work for. But five years after the book was published in 2015, Zappos had slipped down the rankings to 86th the next year it dropped out of the top 100 altogether. Zappo's employees, it seemed, were no longer so happy. What changed? Cautionary Tales will be back in a moment.
- [25:41]
Dr. Maya Shankar
There are moments in each of our lives that seem to change everything. An unexpected diagnosis, the sudden end of a relationship, the loss of a job. As our lives veer off course, it can feel like time is dividing into a before and an after. I'm Dr. Maya Shankar, a cognitive scientist, and my new book, the Other side of who We Become When Life Makes Other Plans, is all about how we navigate these inflection points. The Other side of Change pairs singular real life stories with scientific insights to help us find meaning in the tumult of change. What if we saw the hardest moments in our lives not simply as something to endure, but as an opportunity to reimagine who we can be? I'm thrilled to share that Booklist gave the Other side of Change one of its coveted starred reviews, saying, quote, it's impossible not to be moved. The Other side of Change is out now. Get your copy today, wherever you like to buy books.
- [26:47]
Tim Harford
On Neckar Island, Richard Branson's private retreat in the Caribbean, Tony Hsieh is giving a table 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 horror. He's explaining his quest to turn Zappos into a self managing organization. It's not easy to explain. Holacracy looks so different from traditional corporate organisation 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. Tony explains the idea of an org chart and Jewel follows up. So you're saying it's like the human body, says Jule. 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 ought to make Zappos like that, and your 10 core values are like your genetic code Tony is amazed. Yes, yes, Jules. Explaining Holacracy better than he can, he invites Jewel to a meeting for all Zappo's staff, where she recounts hearing Tony speak on Necker Island.
- [28:55]
Jewel
And what I was hearing him describe 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 and it made me want to pick his brain more.
- [29:10]
Tim Harford
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.
- [29:26]
Tyler Williams
There's no CEO of the rainforest, but the rainforest is self organized. 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 resilient.
- [29:45]
Tim Harford
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 Holacracy was not going well. Tyler Williams remembers when rumours first spread around Zappos that the HR department was piloting some strange new ideas about self organisation. 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 Holacracy across the whole company. Everyone would have to learn the Holacracy constitution, which was full of capitalised words like partner and role and accountabilities. A partner duly filling a role shall regularly compare the current expression of such role's purpose and enactment of its accountabilities to such partner's sense of an ideal potential expression of such purpose and enactment of such accountabilities to identify gaps between the current reality and such a sensed potential. Each such gap, each tension so identified, such partner shall attempt to reduce such tension by identifying, given the authorities and other mechanisms available to such partner under this constitution. The Holacracy 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 allowed. 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 become 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 roles and points or 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 fish 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 perceived control, Tony had said. The knowledge that if you did certain things, you'd get a pay rise. Under Holacracy, nobody at Zappos 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 in consultants to help manage the organisational 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 Zappos 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 their exit interviews about shiny buzzwords and half baked ideas. Those who remained at Zappos stopped telling Fortune magazine that it was a great place to work. Tony Hsieh 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 Holacracy would make him happy. I think what really made Tony happy was being at the bleeding edge of the latest management thinking with its 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 in 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 Zappos 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 shoebox. As Zappos struggled with Holacracy, Tony introduced yet another big new management idea called mbd. That's it 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 Branca. 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 ketamine, 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'd 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. Will be 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 Hsieh by Katherine Sayre and Kirsten Grind and Wonder Tony Hsieh, Zappos 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@timharford.com Cautionary Tales is written by me, Tim Harford with Andrew Wright, Alice Fiennes and Ryan Dilley. It's produced by Georgia Mills and Marilyn Rust. The sound design and original music are the work of Pascal Wise. Ben Nadaff Haffrey edited the scripts. The show also wouldn't have been possible without the work of Jacob Weisberg, Greta Cohn, Eric Sandler, Carrie Brody, Christina Sullivan, Keira 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 ad 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.com cautionaryclub that's patreon P-A-T-R-E-O-N.com cautionaryclub.
- [41:34]
Dr. Maya Shankar
There are moments in each of our lives that seem to change everything. An unexpected diagnosis, the sudden end of a relationship. The loss of a job. As our lives veer off course, it can feel like time is dividing into a before and an after. I'm Dr. Maya Shankar, a cognitive scientist, and my new book, the Other side of Change. Who we Become When Life Makes Other Plans is all about how we navigate these inflection points. The Other side of Change pairs singular real life stories with scientific insights to help us find meaning in the tumult of change. What if we saw the hardest moments in our lives not simply as something to endure, but as an opportunity to reimagine who we can be. I'm thrilled to share that book list gave the Other side of Change one of its coveted starred reviews, saying, quote, it's impossible not to be moved. The Other side of Change is out now. Get your copy today, wherever you like to buy books.
- [42:34]
Tim Harford
This is an iHeart podcast. Guaranteed Human.