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Zappos' CEO: Saving Vegas From Itself

Alex Wagner   |   June 17, 2011    7:48 AM ET

The Zappos offices in Las Vegas are housed in a sun-drenched office park on a stretch of highway that could be found pretty much anywhere -- except for the fact that once you step inside, it becomes immediately clear you're at Zappos, Inc.

Desks, ceilings and cubicles are covered with fake flowers, homemade posters, and paraphernalia ranging from mounted longhorns to marshmallow Peeps. Throughout the day there are spontaneous "parades" though the office, complete with noisemakers and homemade costumes. Zappos CEO Tony Hsieh sits under a lush canopy of fake vines and greenery, in an area of the office dubbed -- for reasons that remain unclear to many employees -- "Monkey Row."

A business wunderkind who sold his first company, LinkExchange, to Microsoft for $265 million two years after it was created in his living room, and has since taken Zappos from an online shoe retailer with $1.6 million in sales in 2000 to one that had over $1 billion in 2008, Hsieh is not your average CEO.

Given that he is now worth hundreds of millions of dollars, Hsieh could have easily retired to Bora Bora -- or any other tropical location where the monkeys might actually be real. He has instead decided to stick with the business of selling shoes, trying, in the process, to make the world a happier place. Hsieh's vision is most concretely laid out in his best-selling book, "Delivering Happiness," which chronicles the life lessons he has learned -- beginning with an ill-fated worm farm at age 9 through to the near-billion dollar sale of Zappos to Amazon.

Broadly, "Delivering Happiness" makes the case that happiness is good for business. "[Research shows that] great companies all have strong cultures. That's our number one priority at Zappos," said Hsieh. "The second ingredient is that all great companies have a vision that has a higher purpose, beyond profits or being number one in the market. By having that, it enables companies to generate more profits in the long-term. It's a weird counterintuitive thing, this whole idea of focusing on culture and higher purpose -- using happiness as a business model."

While Hsieh and Lim initially envisioned the book as a business manual, their ideas about what happiness means -- and how to achieve it -- resonated broadly and deeply with the general public. So far, the book has been published in 17 different languages. "One guy said to us, 'This isn't just a business manual, this is a life manual,'" recalled Hsieh's co-author, Jenn Lim.

This April, Hsieh and Lim decided to spin "Delivering Happiness" into an eponymous company that they describe as a "social venture" akin to Tom's Shoes. The company is for-profit -- "We want sustainable revenue to support the company," Lim said -- but profit is not its primary goal. "For us, it's about managing the excitement and inspiration" that the book has created, Lim said. Citing the digital community that has sprung up around the book, as well as an extended cross-country book tour in the highly customized "Delivering Happiness bus," kitted out with a bartender and a balloon artist, Lim said one of the company's main goals will be to "connect sectors of people who have these amazing ideas -- like people who want to create town halls in their own hometowns."

Delivering Happiness, Inc. will also offer advisory services around "culture coaching," strengthening organizational DNA to make businesses places of both profit and pleasure; "culture book" services, wherein employees describe what company culture means to them; and merchandising and publishing divisions. Lim said that potential clients include private sector businesses, non-profit organizations, and international companies.

The success of Hsieh's sermon perhaps says something broader about a disconnected culture in which the notion of happiness seems so revelatory, but the possibilities for how Hsieh & Co. might revolutionize modern communities -- both commercial and otherwise -- remain great.

As evidence, Hsieh has embarked on a mission to revitalize the city of Las Vegas, something its mayor, Oscar Goodman, calls, "Among the five most important things that have happened since I've been mayor in the last twelve years." As an indicator of the city's economic woes, last October Vegas hit a record 15 percent unemployment and was ranked second-to-last among the nation's 100 largest metropolitan areas in terms of progress made toward economic recovery.

Hsieh was looking to "increase the number of serendipitous interactions amongst employees," he said. "That's when ideas come out. That's where communications happens. Very little gets accomplished in scheduled meetings -- I'm super anti-meetings." He soon became interested in the old City Hall building in downtown Vegas as a potential site for a new Zappos office. "We wanted a campus," he explained.

The location will allow all the employees to be housed under one roof, rather than in separate buildings, as they are now. Once Hsieh began examining the downtown city center, he became excited by the possibilities for revitalization. "There are the seeds of what I think can be a huge opportunity to actually create a sense of town and culture and community in the city that's viewed, probably, by the rest of world as antithesis of that," he said. Hsieh encapsulated his vision for Vegas as "From Sin City to Sim City" -- a nod to the digital urban planning game.

Once the company relocates to the City Hall building in 2013, Goodman said that there will be "10,000 Zappos employees [in the area]." He called their presence "the critical mass needed to have a very vibrant downtown." Much like the research he used to determine how to deliver happiness and develop profitable businesses, Hsieh looked at the principle drivers of thriving urban areas, calling on the work of Richard Florida, author of "The Rise of the Creative Class" and "Who's Your City?"

"Research shows that elements of successful cities include supporting the arts scene, the live music scene -- even things like having shorter sidewalks. A lot of those things are things -- both inside and outside of Zappos -- that we're looking at to help bring to this area," said Hsieh.

Hsieh has developed "10 tracks" aimed at rejuvenating the downtown area, ranging from affordable housing to education to tech incubation. Zappos employees are invited to participate in these tracks and lead specific projects around them, including volunteering with local schools to teach students about technology or starting a community kitchen. Said Hsieh, "We're trying to do fifty startups at the same time, in an integrated way."

"It's a big deal for us," Goodman said, about the plans being laid.

While Hsieh could, at this point, be expected to take some time off from the rather significant task of rethinking corporate culture and revitalizing one of the country's most famously downtrodden urban centers to enjoy the fruits of his labor, it's clear that the classic distinctions between work and pleasure do not -- for him -- exist in the same way as they do for the rest of us. Or perhaps he just has a more enlightened view of the whole thing. "People talk about the work-life balance, or work-life separation," Hsieh said. "Here at Zappos, we really think about it as work-life integration. Because at the end of the day, it's just life."

WATCH:

Can Sal Khan Change America's Classroom?

Alex Wagner   |   April 4, 2011    2:49 PM ET

The battle over America's classrooms, featuring broom-wielding reformers pitted against long-powerful teacher's unions, has created a firestorm of debate over the best way to educate students and prepare them for the 21st century.

Sitting on the sidelines of this battle is a man named Sal Khan. A one-time hedge fund analyst, Khan has become an unlikely hero in education circles--his innovative methodology turns the classroom dynamic upside down.

In Khan's program, students watch a series of 10-minute video lessons at home. Kahn narrates the videos, which are available as free downloads on his website. Homework following up on each lesson is completed at school, where teachers circulate among students for one-on-one instruction and problem-solving tutorials. Software that tracks each student's progress helps teachers plan and respond accordingly.

Khan says his method of learning, dubbed "the Khan Academy," will liberate teachers from the standard "one-size-fits-all" lesson plan and help to "humanize the classroom."

According to Khan's staff, over 12 million people have accessed his 2,200 instructional videos in the last few months, watching them an estimated 100,000 times a day in over 225 countries.

Big name funders and local school districts are among those watching. Bill Gates, an early supporter of Khan's, gave the academy $1.5 million last year. Google, as part of its "Project 10^100" grant competition, awarded the academy another $2 million last year. In December, two schools in Los Altos, California, began implementing Khan's teaching methods in two sets of 5th and 7th grade classes.

"It's been an amazing difference in behavior and attitudes," says Courtney Cadwell, a 7th grade pre-Algebra teacher at Egan Junior High school, one of the two Los Altos that now uses Khan's tools. "These are students who avoided math at all costs -- avoided even eye contact -- and they now have the resources and tools to understand. They're motivated and empowered."

Khan says his program's success is largely happenstance. After he posted several of his homespun videos to YouTube so his nieces and nephews could use them for their schoolwork -- and because he thought that it would "be cool if one day my kids could use these videos" -- he was surprised at the positive reaction he garnered from people who happened across them. "Ninety-nine percent of the comments on YouTube tend to be vulgar or rude -- but 99 percent of ours were positive," he says.

From there, Khan Academy went viral. In 2009, Khan quit his day job and began making videos full time, populating the website with his tutorials, which are non-animated and have few bells or whistles. In each video, Khan remains an off-camera presence: a patient, sometimes goofy tutor offering guidance on everything from the quadratic equation to the anatomy of a neuron. (Khan's financial background is most evident in lessons explaining "The Geithner Plan" and "The Paulson Bailout.")

In 2010, Ann Doerr, wife of venture capitalist John Doerr, saw the site when she heard about it through family friends. Soon afterward, she made a $10,000 donation to the academy. When Doerr learned she had given the largest donation in the organization's history, she donated another $100,000 so that Khan could once again have a salary. "In dollar amount," says Khan, "it was a lot less than [what] Google or Gates [eventually gave me], but in terms of my own psychic safety," it was very important. "We were living off of savings -- we weren't going to starve, but I couldn't not work."

Doerr says that during her very first visit to the Khan Academy website, she spent "several hours" surfing the videos. She and her husband became staunch advocates for Khan and his work. Shortly after their initial donation, John Doerr was, according to his wife, "Tweeting to the world about how great Sal Khan was." She was soon texting Khan from the Aspen Ideas Festival, writing, "Bill Gates is talking about you right now." At the festival, Gates applauded Khan and his line of work, saying he had even used the teaching tools with his own children.

After he received the grants from the Gates Foundation and Google, Khan hired a small staff ("We hired some kick butt engineers," Khan explains) to develop software tools and begin to translate the lessons into Arabic, Bengali, French, German, Hindi-Urdu, Indonesian, Mandarin, Portuguese, Russian and Spanish so they could be distributed globally.

Khan is modest about his beginnings: Initially he says he liked creating the video tutorials because he was "exercising a part of my brain I wasn't exercising in the hedge fund world."

"I always wanted to start a school," he adds. "I talked about it in college -- but I didn't do anything about it."

He isn't modest about his vision for the Khan Academy. Khan speaks about the possibility of "street kids from Calcutta" one day being able to have access to the same education as those in the richest towns in America. While the Khan teaching videos are unavailable in certain parts of the world where YouTube is blocked, Khan says they are working around this issue, partnering with NGOs and corporations to distribute the lessons in alternate forms, including memory sticks and DVDs.

No matter how effective Khan's videos are, results still depend on capable teachers working with the tools. If teachers can't deliver during "one-on-one" time with students, or don't understand and adapt to the Khan methodology, then Khan says there's no telling how successful this endeavor will be -- either in Calcutta or Cincinnati.

"I've been teaching for 21 years, but I made the transition smoothly -- I think because I've always enjoyed the role of being a facilitator," says Richard Julian, a 5th grade teacher at the Covington School in Los Altos, where the Khan tools are part of a pilot program. "Khan Academy works in a class where the teacher is totally willing to give up that control, and take that risk" of using a non-traditional format.

It's perhaps not surprising, then, that Khan aligns himself with reform efforts that place an emphasis on teacher accountability rather than seniority. Both critics and supporters of the reform movement say it tends to champion younger teachers over older ones. It's precisely these less traditional, tech-savvier instructors who seem to do best with Khan's teaching tools.

Khan says his personal view is that "teachers unions don't act in the interest of most teachers. Many of the best teachers I know are being laid off because their unions value seniority over intellect, passion, creativity and drive."

John See, a spokesperson from the American Federation of Teachers, said the AFT is working to develop better standards and protocols to evaluate underperforming teachers.

The White House, unions, state and local leaders will continue to debate how American education reform should look for some time to come. For the moment, though, Sal Khan continues to work towards his vision of a global classroom, tweaking and improving upon the lesson plans -- and, of course, making his videos. "We've got 95 percent coverage from kindergarten through sophomore year of college," he says. "And this is just a year and a half into it! Knock on wood, I'm gonna be around for at least another two decades."

Correction: An earlier version of this article misstated the amount of Ann Doerr's original donation to Khan Academy. It was a gift of $10,000, not $20,000.

Amy Lee   |   January 4, 2011    5:54 PM ET

Sometimes all it takes is a little bit of faith for a struggling individual to finally find success. With MicroGrants, Joe Selvaggio is helping those he calls "people of potential" bridge the gap to their goals.

MicroGrants was founded in 2006, the same year that Mohammed Yunus won the Nobel Prize for pioneering a system of microloans to those in need with his Grameen Bank. The key distinction of MicroGrants, however, is that the program gives out $1,000 grants, rather than loans.

"Poor people have too much debt," Joe said. "It's too risky for them to put their own skin in the game."

Instead, MicroGrants gives the money outright to applicants who can submit their bid through twelve partner organizations in Minneapolis, Minnesota, where they are based. Assisting people in everything from buying the supplies they need to get a business running, to helping pay for educational training courses, or even to upgrade a vehicle for better transportation to work.

Take Shegitu: as an immigrant from Ethiopia, Shegitu found her way into a job, while also working at non-profits to help single mothers find jobs. Discovering that many of the women she met did not have the basic skills to find employment, she decided to start her own small cleaning business, though she lacked the money for a location or supplies. With her MicroGrant, Shegitu was able not only to launch her business, but currently employs 38 women while running several non-profits on the side to benefit women in need of assistance.

Joe, 73, has spent the past forty years dedicated to closing the gap between the wealthy and the poor. After leaving the Catholic ministry for a career in social justice, he founded the Project for Pride in Living and the One Percent Club. The first assists the impoverished to become self-sufficient through housing, employment training, education, and support services. The second encourages the wealthy to donate 1 percent of their net worth or 5 percent of their annual income each year to the charity of their choice.

According to Joe, his faith in the potential for all people to succeed, given the chance, stems from his childhood in Chicago as the child of Italian immigrants.

"It's that immigrant mentality--work hard and make more money, and get better jobs, more education..." he said. MicroGrants lets their grantees get the first foot off the ground so they can work to support themselves.

MicroGrants operates on a donation-based budget that has reached about $500,000 each year, allowing them to give out one or two loans each week. Joe credits the easy logic of reciprocity for the generosity that has allowed the organization to continue on.

"The heart message is stronger than the head--'I was helped by somebody, why not take a chance and help somebody?'" he said. "It's a simple concept: people launch themselves into self sufficiency, it's a very easy thing to understand."

Certainly, Joe has made a life of communicating that concept to others. Assigned to a parish in an inner city in Minnesota, he could not ignore his desire to help the poor become more affluent, and so left priesthood to pursue his passion. After a few years working to sell mutual funds, he realized that there were enough people willing to give their money to the less-fortunate that he could focus solely on administrating the exchange between givers and receivers.

Though Joe hopes that MicroGrants will go nationwide, or at least branch out to other states soon, he has only fond words for his longtime home, the Twin Cities.

"It's a very good culture of giving here in Minneapolis," he said. "There are good, generous, compassionate people here."

Joe, who will be 74 soon, has not wearied of his work in the past forty years.

"I am still excited about this stuff, I never get tired of it," he said. "Seeing people really improve their lives and become self-sufficient is universally accepted--to see people working and making their own way in life is a bridge between the rich and the poor."

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Amy Lee   |   January 3, 2011    2:04 PM ET

Eliminating poverty begins at the source--economic disadvantage.

Anneliese Gryta, a lawyer who has dedicated her work to helping low-income workers gain access to the legal aid they need to help their businesses function, wants to tackle poverty at the root, rather than simply treating its symptoms.

As an Equal Justice Works Fellow, she has set up the Microenterprise Legal Assistance Project with Advocates for Basic Equality in Toledo, Ohio, helping provide legal advice and access to capital for entrepreneurs interested in starting their own small business.

Anneliese, 28, who grew up in a family of musicians in Buffalo, New York, and was a classical violinist throughout college, didn't always plan to become a lawyer. It wasn't until she was exposed to the conditions in inner-city schools as a music teacher while still in college that her focus changed.

"I could never surmount those obstacles with a violin alone," she remembers thinking. "I became so angry that I couldn't provide more help to the kids and families I was working with, and felt like I was going to become very burnt out, very fast, if I didn't acquire some sharper tools to help fight poverty."

A class she took called "Urban Geography" cemented her belief that she could effect change through working in law, and made her understand the "connection between law and legislation and all the social ills that are plaguing our cities."

"That made me really aggressively go on this track of, I just want to learn as much as I can," she said. "A seed implanted by that one professor has impacted the rest of my life."

After graduating from law school in 2008, Anneliese immediately set out to help. With the Equal Justice Works AmeriCorps Legal Fellowship, she began her work helping small businesses with legal aid and clinics. For those untrained in the legal intricacies of starting a business, help from seasoned attorneys can be invaluable.

"Sometimes when people go into business and they're looking into getting a commercial lease,
a few people haven't read the contracts at all, and negotiated for themselves," she said of one instance where legal misunderstanding can harm the budding entrepreneur. "They just sign on the dotted line and the contract will be completely written in favor of the property owner."

This isn't the only hurdle that businesses might face. Liability, contract drafting, and the administrative tangles of setting up a non-profit are just a few of the difficulties that may daunt people who are trying to start a business.

The attorneys love to volunteer and the entrepreneurs really love the help," she said. "It's a win-win."

In her second fellowship with Equal Justice Works, Anneliese is aiming even higher--helping businesses acquire the loans they need to get off the ground, with a focus on the economically disadvantaged.

"In this economy, in a place like Toledo with such a high unemployment rate you may have to create your own job," she said. "I wanted to do something that treated the cause of poverty--lack of resources, lack of finances, lack of credit, lack of education in how to handle money."

Her newest project involves founding two microloans funds for Toledo-based businesses. Assets Toledo helps with very small loans up to $5,000 for graduates of the business training program they also run, with a special focus on those with little credit history.

The Toledo CDC Alliance revives an older, defunct program by partnering with local banks to make loans available to established businesses that want to set up shop in the ailing commercial corridors of the city, so that they can build tangible assets in communities that need them.

Right now, Anneliese is helping save an 80-year-old community arts center, where the economy and other local closures have made it impossible to continue paying the bills, from foreclosure. She is defending the foreclosure and looking for another community group to step up and buy the property before it goes to auction.

"I wanted to expand the capacity of a legal services organization," she said. "To develop a project and respond to a need that I identified and do it in a completely new way."


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