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this video was brought to you by the slide bean agency get the design team behind sliding to prepare your slides for just 29 per slide link in the description the origins of zappos back in 1999 the idea of selling shoes online seemed preposterous how would anyone buy a pair of sneakers before trying them on first so investors weren't convinced of nick swinmurn's idea swinmurn was frustrated with shoe stores they either had the model he wanted but not the size or carry sizes he needed but with limited models so he decided to sell them online and that's why he contacted tony shea but back then buying things online was more of an experiment an adventure add to this that buying shoes can be an art form so shea wasn't convinced at first in fact you almost turned him down but swinmurn lured him with a solid argument footwear is a 40 billion dollar industry in the united states of which catalog sales make up 2 billion e-commerce will likely continue to grow and people will likely continue to wear shoes in the foreseeable future swinmurn had a point shea was a visionary himself and was looking to invest he had made his fortune when he created link exchange an online advertising platform that he'd eventually sell to microsoft for 265 million dollars back in 1998. he then formed venture frogs an investment firm desperate for some action right around when swinburne contacted him so eventually he agreed to invest in shoesite.com in 1999 and the name evidently wasn't catchy so it became zappos after the spanish word for shoes sebatos it was short and to the point zappos initial months weren't easy but shea was confident enough to become the company's ceo in the year 2000. that same year zappos increased its gross sales to 1.6 million dollars and the following year they grew to 8.6 million dollars so what had fueled such growth changes through culture zappos had a lot going for it the company survived the dot-com crash and sales were growing with shea at the helm the company had 70 million dollars in sales by 2003 but it was nowhere near making a profit shay knew there were many areas to improve one of which was customer service something that would become his obsession he once told harvard business review that he had many options to fix this problem he could outsource the call center to a cheaper alternative and increase the operating efficiency but there was a big hurdle zappos as customers were mostly from the us so the company needed us customer service plus a third-party company wouldn't have zappos as core values and vision but finding affordable customer service representatives in san francisco where zappos was based was too expensive obsessed with the solution shea took the company to a cheaper state not just the call center he moved the entire company and this would allow zappos to have full control of inventory customer relations and company values and that was pretty smart in 2004 he also managed to secure funding for zappos from sequoia capital then the company opened its first outlet store in kentucky and created its first culture book but it wasn't an ordinary company book employees helped write it with personal essays these actions took full effect in no time as zappos closed that year with 184 million dollars in gross sales in 2005 sequoia invested yet again totaling 35 million dollars and zappos saw 370 million in sales and this investment is vital in fact nick swinmurn says that without sequoia there'd be no zappos now his name doesn't come up that much since the founder quietly left the company in 2006 because you can only talk about shipping shoes for so long but shea thought the complete opposite taking an almost obsessive view on company culture the reputation proceeds if you google zappos and success you'll find boatloads of articles discussing how the company culture was a key to its success but dig into the details and you'll see some atypical methods besides the company culture book we mentioned employees had open communication through ask anything newsletters once a month the facilities have on-site libraries to encourage reading and zappos has even hired sessions with live coaches remember all the trouble shea went to to optimize that call center well customer service was the stuff of legends though a phone call isn't essential for a company these days shay felt it was critical for the customer at the other end zappos insisted that representatives fulfill the customers demands in fact the number of calls they take in a day didn't matter instead zappos used other standards to ensure top-level service there are urban legends about representatives being on the line for six hours before the customer decided on which products to buy one even helped a customer find a pizza place and it doesn't end there another example was shipping zappos doesn't charge for shipping even on returned shoes and that is the key shea was obsessed with customer service many in the media even call him the king of customer service think about it how many companies do this not many but not everything was perfect atypical employment techniques on a scale from one to ten how weird are you think about it i'll give you a second that was a question shay asked possible candidates if you're a one you're probably a little too straight lazed for us if you're a 10 you might be too psychotic for us it's not so much the number it's more seeing how candidates react to that question he once told adam grant it makes sense caught off guard people reacted more naturally shea however took it one step further with the offer after a week or so of hiring somebody shea would approach that person and make them an offer they could either keep working for zappos or quit and the answer might seem obvious but there was a twist if you considered quitting zappos would pay you up to two thousand dollars in some cases why if you're willing to take the company up on the offer you obviously don't have the sense of commitment they're looking for shay said in an interview weird extreme but it worked the offer purged zappos of those who didn't believe in it and the company kept growing by 2008 zappos neared one billion dollars in sales and some companies wanted in but not all of his corporate culture experiments worked out in 2013 he eliminated all company titles zappos would become a holocracy a place without bosses sounds great but when it happened 14 of the workforce took up on the famous offer amazon comes in the first time jeff bezos offered to buy zappos was in 2005 but shea had turned him down but the 2008 crisis brought challenging times for the company and the idea of selling it wasn't far-fetched the challenges weren't only financial some of it had to do with shae's views on culture he told inc.com that the board wanted me or whoever was the ceo to spend less time worrying about employee happiness and more time selling shoes also cash was hard to come by not a good sign in a company that relied heavily on credit lines initially shea and his cfo friend alfred lin decided to buy out the board which would cost them 200 million dollars it was then that amazon reappeared but no matter how good the offer was shea feared that his company culture the one he had worked on for so long would disappear the acquisition talks were tense shay recalls especially with the board but eventually it came to fruition for no less than 1.2 billion dollars and the cherry on top the company's culture survived in fact amazon copies some of zappos's philosophies including the offer shay remained on the board and ceo in fact after the amazon purchase zappos consistently ranked high in fortune magazine's 100 best companies to work for for four years in a row shea's tenure as ceo was often viewed as successful and a great indicator of how to do things right he hung around celebrities and was famous for his energy quirkiness and overall good vibe but behind the scenes things were very different shea and enigmatic character shay was viewed as unique for his philosophies on success and desire to make people around him happy philosophies that he captured in a book called delivering happiness a summary of his views on marketing finances and life principles the book was an instant success it debuted as number one on several best-selling lists received praise from critics and became a business reference for many but in his personal life things weren't as bright multiple acquaintances tell of his obsession with taking his body to the extreme he would fast just to see how long he could go without food once weighing under 100 pounds and see how long he could go without urinating he would consume nitrous oxide to the privacy body of oxygen and for taking the alphabet diet in which for 24-hour intervals he would only consume food with the letter a and the letter b and so on journalist angel au young summarized tony shea as a man who loved to create happiness and needed non-stop action he needed people whether that be through parties or drugs he fostered so much human connection and happiness yet there was this void it was difficult for him to be alone right oh young a difficulty that increased with the imposed isolation of 2020. as the world shut down so did the energy that fueled shea close friends say that shade turned more to drugs and his mental health suffered so much so that he had to step down as the ceo of zappos he purchased several houses in utah with his fortune where he planned to melt art food and culture and once again be surrounded by people but the world remained isolated socializing was still tricky and shay struggled between his visions and his addictions his close friend singer jewel had even warned him that this path had only one exit on november 27 2020 tony shea passed away from injuries suffered in a fire one week before the circumstances of his passing aren't precise and speculation runs wild but evidence indicates that he plans to enter rehab signs that he wanted a change so here's to hoping that his untimely death isn't in vain his legacy is evident both his lessons as an entrepreneur and the cautionary tale of the cost of success it's on a rare occasion that the company forensic story is involved with the life of a character that's so beloved to a lot of people close to us though i'm late to this entrepreneurship world not enough to meet tony shea in person at any point the testimonies the stories of people close to me people that i follow on how beloved and what his legacy is certainly impacted me and i was genuinely surprised last year when when the story broke out we only hoped that this episode of forensics helps remember tony shea and zappos and the story of his company and what he was able to achieve in a way for the future entrepreneurs to be inspired by we'll see you next week you