The Death and Life of Tony Hsieh: The Dynamics of Projection

 On November 18, 2020, Tony Hsieh, who had been the CEO of Zappos, the online shoe retailer, died in a fire in a shed attached to a riverfront house in New London, Connecticut. His life and death were consequential. As an early investor and then CEO of Zappos, he built it into a company with gross sales of close to a billion dollars. In 2009, he and his executive team sold the company to Amazon for $1.2 billion in an all-stock transaction. The company pioneered customer service in an online age by letting customers return shoes, no questions asked, for up to year. This took the anxiety out of buying shoes, sight unseen, and helped people try out several different styles before settling on one, much as they would in a store.  For many, buying shoes in this way became an exercise in delight. 

This was a breakthrough to be imitated later by Amazon itself. But Zappos was distinguished in yet another way. The company became famous for its working culture. Most of its employees were call center workers, the kinds of employees or contractors who are often treated poorly, their performance measured by the minute, and their personal needs and interests disregarded. Their average turnover is about 30-45% per year. Zappos took the opposite tack. Call center workers followed no script, their calls were not timed and they were enjoined first and foremost not to make a sale but to establish a relationship with the potential customer with patience, good advice, and good cheer. The simple idea was that a single sale is a transaction but that good relationships create ongoing sales. The nervous customer planning a wedding might not buy shoes on the first call, but if she experiences good help she will in all likelihood call again to buy shoes first for the wedding, and later for other uses and settings. 

Call center work is nonetheless taxing, workers are anonymous to their customers, while some customers can be abusive. The customer's relationship is ultimately to the brand not the worker. Through experiment and experience Zappos created an internal culture based on extraversion and good cheer.  As one observer writes, “A requirement for the job is to possess a zany, overly enthusiastic attitude on the phones with customers.”[1] When you put such people together at work, and when a substantial number are young, as was the case, they will socialize after work, find that they like partying and bar hopping with each other and bring this way of relating into the workplace. This happened, as Hsieh notes, through an organic process. 

One result was that the office climate came to approximate some mix of a dorm room and a carnival. As Hsieh wrote, “If you were to show up for a tour (of Zappos) today, you might find a popcorn machine or a coffee machine dressed up as a robot in our lobby. As you passed through different departments, you might find an aisle of cowbells (“more cowbell?”), a makeshift bowling alley built by our software developers, employees dressed up as pirates, employees karaokeing, a nap room, a petting zoo, or a hot dog social. You might see a parade pass by because one of our departments decided that it was the perfect day to celebrate Oktoberfest. And you might say hi to our life coach (our own internal version of Tony Robbins), wear a crown, and get your picture taken and put up next to the pictures of Serena Williams or Gladys Knight when they came and toured our offices. Or you might happen to show up during our annual “Bald & Blue'' day, where employees volunteer to get their heads shaved by other employees.”[2] Zappos also had a specialized team of “fungineers'' that created fun events such as a Hostess Sentential, a party with birthday cake cupcakes, and Fandom Friday, a community event in which employees expressed their inner weirdness by dressing up and playing with toys and gadgets in an amusement park setting. One observer, the Mayor of Las Vegas and long accustomed to craziness, told a reporter after visiting the company, “People were running around with flags, dolls at their desks, marionettes, lying down, eating candy. I had never seen anything like it.” [3]

In sum, there was a method to this madness. The fun compensated for moments of drudgery, and the impersonal aspects of call center work. It provided psychic income when the ongoing wage rate, $11, was low, though typical. Workers entertained each other. Culture spiked morale, created loyalty while reinforcing the unusual discretion workers had to do their work. The formula really worked. 

As word of its zaniness spread, thousands of people joined Zappos tours to see its workers in situ and to marvel at the incongruous amalgamation of a serious business with zany fun. Hsieh wrote a best-selling book, part autobiography and part business story, Delivering Happiness: A Path to Profits, Passio and Purpose, a title that reflected his conviction that he had discovered how to create happy settings and happy people. The book ends with a call to action. “The ideas from this book could end here. You can choose to close the book and do nothing and move on with the rest of your life. Or you can be part of a movement to help make the world a happier and better place. The choice is yours.” 

 

Hsieh’s Death

 

It is not without irony then that it seems that Hsieh committed suicide, in effect he burned himself to death, or if he did not, he was certainly on a path toward self-destruction. As the New York Times reports, “Mr. Hsieh could be seen on a security video from Nov.18 (2020) looking out the shed door about 3 a.m., even though no one was about. Light smoke rose behind him. When Mr. Hsieh closed the door, there was the sound of the door lock latching and a deadbolt being drawn…. Investigators said they didn’t know exactly what had started the fire, partly because there were too many possibilities. Mr. Hsieh had partly disassembled a portable propane heater.  Discarded cigarettes were found. Or maybe the blaze erupted from candles. Investigators said his friends had told them that Mr. Hsieh liked candles because they ‘reminded him of a simpler time’ in his life. A fourth possibility is that Mr. Hsieh did it on purpose.” As the article goes on to note, firefighters found nitrous oxide, - laughing gas canisters- in the shed along with Fernet Branca liqueur bottles and a marijuana pipe. Any of these substances and in combination could have impaired Hsieh's judgement. Hsieh also had a long-standing fascination with fire. 

 

Positing suicide is ultimately speculative. No one but Hsieh was in the shed. But there is little doubt that Hsieh was self-destructive. He became a biohacker testing the limits of this body's capability to endure pain. “He starved himself of food, whittling away to under 100 pounds; he tried not to urinate; and he deprived himself of oxygen, turning toward nitrous oxide, which can induce hypoxia.” After he resigned from Zappos as CEO in 2020, he moved to Park City in Summit County, Utah. Hating to be alone, he paid friends to join him. He offered to double their highest salary for no show jobs if they agreed to move with him. The result; he was surrounded with “yes men” who did not have the courage or interest in calling out his destructive behavior or enrolling family members and friends to help him.

 

His friend, the singer-songwriter, Jewel (Kilcher), was an exception. After visiting him in August and then leaving Park City precipitously, she wrote to him, “When you look around and realize that every single person around you is on your payroll, then you are in trouble Tony. If the world could see how you are living, they would not see you as a tech visionary, they would see you as a drug addicted man who is a cliché. And that’s not how you should go down or be known.” “Your body cannot take not sleeping. And the amount of N2O you are doing is not natural. You will not hack sleep and you will not outsmart nature.” She ended with the thought that he was at risk of crossing the line, “from eccentric to madness.”

 

 

Hsieh’s creativity and his early years.

 

There is no doubting Hsieh’s business creativity and capacity for taking risks. In Delivering Happiness, he tells the story of an early business venture. As a middle-school boy he saw an advertisement for a $50 button making kit in the magazine Boys Life. “The kit allowed you to convert any photo or piece of paper into a pin on a button that you could then wear on your shirt.” [4]Borrowing $50 from his parents he bought the machine and placed ads for 25 cent pin-on buttons in the magazine. Soon he was getting 10 orders a day and making $200 a month. When, as an undergraduate, he ran the Quincy Grill in a Harvard university dormitory he ran up against a city regulation that fast food outlets could not be on campus. So, he bought lots of a hundred frozen hamburgers from a MacDonald’s for $1 dollar per burger and resold them for $3. After graduation he and his friend, Alfred Lin, established the “LinkExchange.” The business idea was as creative as it was simple. A website owner would accept banner ads from other members of the exchange. For every 100 ads that appeared on an owner’s site she got the right to 50 banner ads on other sites. The LinkExchange would sell the additional 50 ads to members who wanted more exposure, or to outsiders who were not exchange members. Hsieh sold the business to Microsoft for $265 million. He was 25 years old.

 

He and Lin used the money from the sale to invest in Zappos and in 2000 Hsieh became its CEO. His capacity for taking risks was essential to the company’s success. In its early years, Zappos was a true intermediary, a “middleman.” It took orders for shoes, then bought them from shoe manufacturers who in turn shipped them directly to the customers in a process called drop-shipping. The advantage was that Zappos never held shoes in their own warehouse, thus eliminating the carrying costs and risks of holding inventory. But the downside was that some manufactures could not send shoes directly from their own warehouses upon receipt of an electronic order, while others were often sold out of their most popular shoes. Despite the severe cash crunch Zappos faced, Hsieh was selling some of this real estate holdings to finance the company, he and Lin made the big bet of buying and holding inventory, putting the company in charge of shipping directly to customers. The bet paid off. Gross sales grew 8 times over in one year. 

 

Hsieh’s unhappiness

 

In light of Hsieh’s decline and death it is reasonable to ask if Hsieh himself, bent on delivering happiness, was in fact happy. While this is a surmise, if you watch an interview he did in 2012, fully eight years before his death, with Barbara Walters, the famous television newscaster, he appears subdued and withdrawn. One is tempted to say depressed. And this interview is interspersed with the zaniest of images; customer service workers dressed as barmaids, Spiderman in the cafeteria, and workers racing toy cars in the middle of the office. The discrepancy is jarring. 

 

There is good reason to suppose that he was depressed. In her thoughtful book on Hsieh,The kingdom of happiness: inside Tony Hsieh’s Zapponia, Aimee Groth paints a picture of Hsieh's, emotional estrangement from other people. Quoting a Hsieh informant, she writes, “He’s looking at everything from this far-off place, from over here,” she pointed far to the left.[5] “He’s looking at the system, the ecosystem. And that means he’s sometimes removed from the human emotion aspect of things in the now moment.” Another informant tells Groth, “All of his personal relationships have purpose statements. We’re friends, but when we meet, he wants to dive into agenda items. It’s his language.” [6]Groth herself characterizes Hsieh as someone who games people rather than relates to them. “He’s a gifted game theorist and poker player. There is always a maneuver to be made, a chess piece to be moved.”[7] Summing up the observations of those who knew Hsieh in Las Vegas, where Zappos was headquartered, she writes, “to a lot of people in downtown Vegas, Tony doesn’t seem all that happy.”[8]

Understanding Hsieh’s estrangement

One hypothesis is that Hsieh substituted his considerable intellect for his feelings as a guide for understanding and connecting with others. He was not isolated from people. To the contrary, throughout his shortened life he surrounded himself with friends and colleagues. Indeed, one model of relatedness he internalized and sought to reproduce was the college dorm. For example, after he sold LinkExchange he and his friends brought 20% of the lofts above a theater complex in San Francisco.  He describes what he calls this lucky break. “As luck would have it I happened to be driving around one day and saw that AMC was opening up a brand new movie theater complex right in the heart of San Francisco… and right above the lobby fifty-three brand new lofts were about to go up for sale… I thought back to my college years, when there was a core group of us who always clung together. We could create our own adult version of a college dorm and build our own community. It was an opportunity for us to create our own world. It was perfect.” [9] When he moved Zappos to Las Vegas, partly to reduce costs, he bought an apartment complex, and encouraged employees, entrepreneurs and colleagues to move in with him.  As Groth writes, “Tony wanted to replicate the feeling of being in a college dorm.” [10]

This description of Hsieh’s experience, seeking contact while lacking feeling, evokes poignancy. Had he been simply an introvert he could have avoided emotional entanglements and found satisfaction in doing what gave him solitary pleasure. Some scholars and scientists strike this bargain with their interpersonal surround. They have a vocation that gives them pleasure and recognition, but they avoid depending on others to any great degree to provide them emotional satisfaction. But Hsieh was driven differently. He wanted people in his surround, he loved partying with them -- he did this with abandon in Las Vegas—yet, if his friends' observations are accurate, he could not connect with them emotionally. 

The Poker Game

One metaphor for this experience of both estrangement and entanglement as Groth suggests, and as Hsieh references it extensively in his book, is the poker game. Hsieh links his extensive experience in playing poker to his growing mastery of business. He learned that mastery requires complete immersion, that you can draw the competitors you meet into your friendship network, and that you learn best by playing against talented players. Most importantly, your most consequential choice, he argues, is which poker table you join. These are sensible lessons for business. For example, even a mediocre competitor can succeed in a growing market,- a good table- while a supreme competitor can fail in a declining one. 

But let me propose that he also pays considerable attention to poker because of the model it offers of relatedness. The poker table is an ensemble of intimate enemies. Players are connected through their conflict over the stakes, their shared risks and the tension they co-create as people call or raise a bet, or simply fold. This creates a feeling of intimate dependency at the same time as people disguise their intentions and exercise deceit. The resulting climate, I propose, resonated with Hsieh’s internalized conception of a human community. People are so inextricably tied to one another yet they are perpetually hiding from each other. 

 

This also clarifies why the college dorm also figured so centrally in his understanding of the human community. At first blush the poker table and the college dorm as both real settings and as metaphors appear to contradict each other. The former is tension ridden, the latter, a setting for pure fun. But they are related in the sense that the dorm provides an escape from the poker table. In the idealized dorm people co-create fun, not tension, by shedding all distinctions of talent and authority in the pursuit of shared pleasure. In this setting drinking is frequently the solvent and Hsieh, unsurprisingly, was an inveterate drinker. His favorite drink was the herbal Italian liqueur Fernet Branca.

 

Hsieh’s family background

 

One natural question is what shaped Hsieh's character? What placed him in this box of both surrounding himself with others while remaining emotionally estranged from them? His business autobiography provides us with only a few hints but they are nonetheless helpful for informed speculation about this psychobiography.  Most importantly, he notes that he grew up in the cultural milieu of an Asian-American family where, “the accomplishments of the children were the trophies that many parents defined their own success and status by. We were the ultimate scorecard.” He describes how in middle school he learned to play four instruments and was expected to practice each one for 30 minutes a day during the week and one hour during the weekend. 

 

Hsieh ascribes his experience to a cultural milieu rather than to his parent’s choices, most likely to protect them either consciously or unconsciously. And of course, many children who grow up in such settings are not unduly damaged psychologically. As in all matters psychological, the result depends on both the family setting and a child’s vulnerabilities. But a useful generalization is that when parents treat their children as trophies they are behaving narcissistically, using the child as an object of their own ambitions and fantasies, while disregarding the child’s own impulses and desires. An extreme case is the stage mother who pushes her daughter to become an actress in the hope that the latter’s success will provide her with the glamour and excitement that has eluded her. Judy Garland's mother gave her diet pills, amphetamines and sleeping pills when she was only10 years old. 

 

The vulnerable child may simply succumb. But others can resist by separating, for example attaching themselves emotionally to teachers or neighbors, or by engaging in the mind games that characterize the relationships between narcissistic parents and their children. In the latter case, the child fights back but only indirectly, since the underlying premise, that the parents don’t recognize the child’s own wishes, cannot possibly be addressed. Consider the following story Hsieh tells. Instead of practicing the piano on weekends, as was required, he would “playback an hour-long session he had recorded earlier.” Hearing the recording his parents would think he was practicing. Shades of an entrepreneur! If they were going to make him into a trophy he would tarnish the trophy by refusing to excel, but only through subterfuge. And add to this the dollop of omnipotence he felt as a child being able to fool his parents on a matter of importance to them.  

 

Consider finally how he ends this tale of deception. “Hopefully my mom won’t get too mad when she reads this. I should probably pay her back for all the money she spent on my piano and violin lessons.”[11] I think he intends this to be a charming admission but it in fact feels infantile. For example, consider the use of the word “mom” rather than “mother.” And this passage enacts the very issue he is describing. That is, he is conscious of his mother’s watchful eye, a gaze that communicates judgment, and imagines repairing the psychological injury he is causing her with his revelation, by giving her money. A pure transaction. Lest the reader think that these inferences are exaggerated, consider the fact that in a major interview on National Public Radio Hsieh recounted just this story. In this way, he communicated its salience. I suggest that this story illuminates the mental template of relationships he carried with him into his adult life; that he could not trust others, that he had the skills to dominate them and yet he was fated to be ensnared with them. Hence his anxiety about this mother’s response to the passage in his book. Think the poker game.  

 

Projection and its vicissitudes 

Hsieh believed he was part of a large movement for delivering happiness while Zappos was his proof point in how to accomplish this. In summing up his work with Zappos he notes how its vision and purposes had expanded. In 1999, it provided the Largest selection of shoes in 2003 it provided the best customer service and in 2009 it was “delivering happiness,” the subject of his book. This summing up is the prelude to his call to action for others to join him in making the world “a happier and better place.” 

Let me suggest that this expansion of purpose was one manifestation of psychological projection. That is, as he found business success and experienced his considerable creative powers he began to use Zappos as setting upon which to project the demons of his inner life. Why do I say this? Thinking objectively and dispassionately it seems implausible that Zappos was the keystone of a social movement for delivering happiness, the fantasy he describes in the very last passage of the book. After all, it was just selling shoes. But as an unhappy person, or at least a person who suffered from his estrangement from others, Hsieh could entertain this implausible idea because the press of his inner life, the tension between being with others while feeling estranged from them, was all too real and present. As often happens, he sought to resolve the tension, not by addressing it directly, that would have been too painful, but by projecting out his inner struggle onto his creation. Zappos would deliver him his happiness by representing the ideal community where everyone could be wholly themselves and accepted by others without equivocation.    

But let me also rise to his defense. His milieu supported his projection. As Zappos succeeded and people were drawn to its unusual culture of working, he and his colleagues were invited to speak at many conferences around the world, for example at TEDIndia, a conference where the Dali Lama also spoke, the Inc. 500 conference, and South by Southwest- the annual conference of technology and culture that takes place in Austin Texas. After his book hit number one on the bestseller list, his speaking fees spiked, and he spent a good portion of the year on the speaking circuit. As Hsieh writes, “All of this led to the single biggest unexpected result of our public speaking: realizing that we were actually changing other companies and other people’s lives. It slowly started sinking in that we could be part of something that was much bigger than Zappos. We realized that we could change the world not just by doing things differently at Zappos, but by helping change how other companies did things.” [12]

What was going on here? Let me suggest that just as Hsieh projected his inner life onto his business creation, the wider culture was projecting its own fantasies into Hsieh. The two projections met in Zappos. And what was the societal fantasy? That work-life could be without friction, that in taking up work roles people need not sacrifice their desires, that there need not be a disjunction between work and self. 

 

I call this projection onto Zappos a “fantasy” for five reasons. First, the heart of Zappos was its call center. Of course, the devil is always in the details, but in the large scheme of things this is not a complicated business. It does not hold a candle, in terms of complexity, to a hospital, a software development firm, or a manufacturing facility. It could not be a general model for the design of happy workplaces. Second, many of the employees were young college graduates without a great deal of life experience. This made them more malleable and more likely to subordinate to a program of extraversion and zaniness even if and when, As Groth observes, they felt unhappy or dissatisfied. Third, as recent college graduates, many had not yet started families, which meant that they were more dependent on the company’s social milieu for satisfaction. Fourth, as Groth reports, some Zappos employees called the compnay, “the land of misfit toys.” [13]As she goes on to write,” It’s (Zappos’ culture) a brilliant tactic to give people who normally feel cast aside by society the opportunity to feel special; like they can express themselves while doing the routine work of answering phones.” [14] Fifth, unlike high tech firms that hire what a former Zappos executive called,” freakishly smart people or A students,” Hsieh recruited the, “B minus to C students, and created a highly structured environment in which working hard becomes fun and the company gets not just an employee but a disciple.”

Zappos in this sense was the exception that proves the rule. It could not really be a model of how to organize and design a workplace. So why did thousands of people visit Zappos and take its tour? Of course, a visit was entertaining and people had to see the “show” for themselves. But to give the devil his due, the ideas and feelings that Zappos represented to others were not just fantasies of the moment. Instead the notion that work should not be alienating is a longstanding utopian idea which is as old as the industrial revolution, and which at one point was transformed into political action through Marxism. This is surely an idea, that though we cannot practically achieve it, is nonetheless a standard we can and should use to evaluate our everyday experience. A utopian idea can be helpfully provocative even when it is implausible. For example, following the train of thought triggered by the idea of work without alienation, we can ask if work feels purposeful, if we are treating people at work with dignity and if we have done our best to match their skills and talents with the work to be done. We can work toward these standards, all the while acknowledging that work will also injure our self-esteem, that our work will be evaluated and found wanting, and that we must submit to authority and do work we dislike. 

This suggests that Hsieh surely gained legitimate stature and standing insofar as he represented the valued attempt to make good on an ideal which has deep roots in modern life. But the dilemma emerges when we confuse an ideal with an idealization. When Hsieh became a celebrity and his book was accepted as a tome for delivering happiness, he came to represent what was possible only as a fantasy. 

The danger of idealization

But a person who is idealized, who lives in the crosshairs of other peoples’ projections, faces two dangers. First, If and when people see a celebrity’s flaws, they are not simply disappointed. Rather, they take pleasure in these evident signs of imperfection. Their prior admiration reveals an underlying envy of the celebrity’s accomplishments. That is why fans attack Hollywood stars. My hunch is that when people visited Zappos in droves, some number of them saw its extremes as a caricature of an adult work setting, something to be laughed at rather than admired. In turn, this would ironically relieve them of their obligation to evaluate their own practices. They could leave a Zappos tour with the thought, “well this is a bit too crazy!” 

But the celebrity faces a second danger. If he introjects the societal fantasy, as Hsieh clearly did, he has, as the saying goes, “drunk the Kool-Aid.” This means that the impossible standards he has set for himself stand as an indictment of what he has in fact achieved. That is why, I suggest, he presents as depressed in his interview with Barbara Walters. He is paraded as a paragon against the backdrop of juvenile conduct. He is living in the arena of bad faith, however much he is praised. 

Hsieh faced yet a third danger, the result of his own projection. Since his fantasized achievement was an attempt to heal his inner damage, an impossible goal in its own right, he failed twice. He had not healed himself, much less society. There are only two recourses at this apparent dead end. To abandon the project of self-perfection or to double down on the undertaking. Hsieh doubled down. 

Holacracy

In 2009, Hsieh sold Zappos to Amazon for about $1.2 billion in an all stock transaction, with the assurance that he could continue to manage the company according to his own lights. It was a successful exit from a startup venture by any criteria. Yet in 2013 he turned Zappos upside down by launching an experiment in social engineering. He overturned its traditional hierarchy by turning it into a Holacracy, a system of governance designed to democratize decision making. It is based on governing circles, each linked to a domain or topic, with “lead link” roles to connect them. 

 

There is little doubt that this was enormously disruptive. The Zappos Holacracy had 500 circles, and twice as many lead link roles as there had been traditional managers. Each employee had about 25 responsibilities. One independent study of the company during its Holacracy phase found that, “In the last three months of 2015, Zappos’s roughly 1,500 employees made and received 17,624 role assignments (11.7 per employee), or about 195 per day.”

 

Holacracy as a doctrine also specifies how people should conduct circle meetings, for example, a governance meeting focused on the circle's structure. There is a check-in, an agenda building process, methods of presenting and discussing proposals, a sequence for clarifying, objecting and amending ideas, with attendant rules on how to separate these phases of a discussion. Any organization development practitioner recognizes these as potentially useful guidelines when you want to encourage all members of a meeting, particularly those of lower status to participate. The downside of such guidelines, when they become doctrinaire, is that they drive out the spontaneity of free-form discussions which is the basis of group creativity, they put pressure on people who would like to remain silent, they suppress self-evident differences in talent, and they defang passion for fear that it will lead to conflict. 

The dirty secret of such processes is that in the end people, whatever arrangements they find themselves in, are forever attuned to the issue of status and hierarchy. For example, in describing how the Holacracy experiment unfolded at Zappos, Groth reports that employees engaged in what could be called, “the great land grab.” “Essentially what happened is that employees claimed domains early on so that they would have job security. Zappos managers were the first to be trained in Holacracy and quick to claim domains to protect their power as managers and to ensure that they didn’t lose their jobs in the “manager-less” system.”[15] Zappos employees felt that, “despite the transparency, there is still a phantom operating system cloaked in ambiguity”.

There is a simple insight here. No organization, whatever its formal design, can dispense with power and politics. Moreover, hierarchy for all the knocks it takes, has the advantage of being reasonably transparent, that is, it specifies clearly who is in charge, and for what any person in a particular role is accountable. When responsibilities proliferate it becomes more, not less difficult to hold people accountable for their performances. 

Holacracy’s pull

What was Holacracy’s magnetic pull on Hsieh? Paul Bradly Carr, a keen observer of Zappos from the time Hsieh was in Las Vegas writes that Holacracy is designed for managers who hate conflict and that Hsieh, “would go to ridiculous length to avoid saying no.” There is little doubt that Hsieh disliked exercising direct authority. He hated it when employees referred to the area where he sat as, “executive row" and was pleased when a confidant relabeled it, “monkey row.” “He arranged for camouflage netting to be put up (near his desk) and suspended stuffed monkeys and other creatures.” Of course, the term was denigrating and the gesture self-deprecating. When Hsieh on occasion led tours of the Zappos facility, and before he was immediately recognizable, he would identify himself only as a Zappos employee. 

It is said that “love flees authority.” If, as I have suggested, Hsieh craved human contact but too often felt emotionally estranged from people, his aim was then to create a community where authority was no obstacle to the experience of belonging, in particular his. Holacracy as a presumably manager-less system fit the bill perfectly. In this sense Holacracy became the vehicle for the renewing and amplifying his process of projecting his inner needs onto his organization. He wanted to be loved for who he was. At the same time in reaching for Holacracy he found resonance with a wider cultural process, of the utopian variety, that authority is an obstacle to good working and an unnecessary impingement on people’s freedom. 

  

Goodbye to Holacracy 

 

In 2015 Hsieh had offered Zappos employees a buyout if they could not abide by Holocracy as the setting for work. 18% took the offer. In 2016 “Zappos fell off Fortune’s 100 Best Companies to Work For ranking “with scores on the publication’s employee survey down on 48 of 58 questions.” By 2017 it became evident that Holacracy was undermining performance most likely because it focused employees' attention internally, on their relationships to each other, rather than on customers and their satisfaction. 

 

In 2020, Zappos announced yet another point of departure. Hsieh and his top team reorganized Zappos along marketplace lines. People would belong to an internal business and would transact with each other  buying and selling services from and to each other. One hope was that if Zappos were composed of small businesses that were rewarded for innovation, they could develop new services to offer customers. Eyeing the extraordinary success of Amazon Web Services, Hsieh speculated that Zappos could develop a new suite of business services for supporting startups.

 

I don’t have information on how this arrangement is working out, particularly after Hsieh’s death. Color me skeptical, particularly because a call-center company that prized culture over talent is unlikely to have employees with the skills required to develop a suite of sophisticated business services. What is striking however is that instead of returning to what worked best, a traditional organization design, Hsieh launched upon yet another experiment. Moreover, in creating internal markets, which thrive on competition and exchange, he swerved from his earlier intention in building a Holacracy, which was to create a sense of community. Why did he persist in imposing yet another new blueprint on his company and why in doing so did he change horses? 

 

Hsieh was deeply influenced by his experience of Raves, “an organized dance party at a warehouse, forest, cave or other private property or public space, typically featuring performances by DJs, playing a seamless flow of electronic dance music.” Describing his first Rave he writes, about, “the feeling of awe that I was experiencing that was leaving me speechless. As someone who is usually known as being the most logical and rational person in a group, I was surprised to feel myself swept with an overwhelming sense of spirituality—not in the religious sense, but a sense of deep connection with everyone who was there as well as the rest of the universe.” [16]This was the dorm party, one of his models of relatedness, on steroids. As his description suggests, when he experienced the intensity of the Rave he transcended his loneliness by fusing with others. In such settings the experience of difference vanishes. This was the sense in which the Rave afforded a spiritual experience. Romain Rolland, in a letter to Freud called this, “the oceanic feeling,” and like Hsieh, described it as religious experience.[17]

 

But Hsieh’s other model of relatedness was the “game,” in which he related to others through manipulation. If Holacracy was his attempt at fusion, a failed return to the Rave, the internal marketplace was his drive to manipulate, his return to the game. Sadly, what he could not achieve was straightforward collaboration based on being both vulnerable to others while different from them. Instead, the Rave replaced vulnerability and manipulation replaced difference. This is how Zappos remained the arena for projecting out his inner conflicts.

The destructive impact of projection

An artist by instinct uses emotional projection to infuse a painting, novel or piece of music with the emotion that stirred the projections in the first place. Permit me to tread on holy ground here for a moment. It is reasonable to surmise that Dante, in his sublime, The Divine Comedy, used the emotions stirred by his unrequited love for the real Beatrice to construct her imaginary counterpart as his guide in heaven. Projection is one foundation for good art. 

But there is a vast difference between projecting into art and projecting into social arrangements. In the former case the stakes are centered on the art work’s success as a communication to others. The intended audience appreciates it or not. In the latter case real people become objects in a leader’s fantasy and they have to live with its consequences. For example, some 20% of Zappos employees left after Holacracy’s introduction and some fraction of those who stayed had no other choice. As Carr writes, “Having spoken to some of those who remain, it’s clear that many stayed behind because they lacked any other options. These are not young, single entrepreneurs, they are customer service employees and rank-and-file workers, who have mortgages to pay in Las Vegas and children in school. If they leave Zappos, there aren’t many other jobs waiting for them — particularly if they don’t relish the long hours and pinched bottoms that come with customer service work on the strip.”

Las Vegas

One can see the potentially destructive impact of projection in Hsieh's parallel venture, his fantasy that he could turn Downtown Las Vegas, where Zappos was headquartered, into a high-tech incubator. Starting in 2012 and working with Holacracy’s founding father, Brian Robertson, he “wanted to create an off-the-shelf city-building formula,” using startups and entrepreneurs to revitalize downtowns and their cities.[18] This undertaking called, “The Downtown Project” was based on the blessedly naive assumption that what one could engineer a setting to maximize the number of serendipitous encounters its residents would experience. These encounters which Hsieh called “collisions,” would propel development. As Hsieh told a colleague, “If you do the math of one hundred thousand collisionable hours per acre per year, that translates to something like 2.3 collisionable hours per square foot per year.” [19]The math is right but it sidesteps the lengthy process through which residents, entrepreneurs, investors, local service providers and retailers do or do not cohere to create a self-reinforcing process of economic and social development. The simple fact is that few cities have been able to create high tech cores that even approximate the accomplishment of such settings as Silicon Valley, Bangalore, India or Tel Aviv, Israel. 

Hsieh was a wonderful salesman and he attracted a good number of people to his venture, offering to help them make good on their dreams. For example, over dinner Hsieh asked Zubin Damania, an eccentric physician who mocked the medical profession on popular YouTube videos, “if he wanted to transform the future of medicine in Las Vegas.”[20]Zubin had shared he was unhappy practicing as an internal medicine doctor at Stanford University. As Zubin recounted later, “My jaw dropped.” And Groth adds, “that’s the sort of blank canvas that few people encounter in their lifetimes.”[21] He moved to Vegas with his family and with Hsieh's money started Turntable, a medical clinic. The clinic charged patients a fixed monthly fee rather than fees for service and used health coaches and social workers as its front-line workers. The concept was wonderful. Few people doubt that preventive medicine, based on a good diet, adequate exercise and stress management can succeed in principle. But it is so hard to implement, people are becoming more obese not less, and difficult to sustain financially when insurance companies pay for service rendered. The clinic closed its door after three years. 

Similarly, a University of Iowa professor, David Gould, left his teaching job, after observing how mesmerized his students were when Hsieh visited his college town. As he wrote to Hsieh in a resignation letter some years later, “We met in the fall of 2010, when your “Delivering Happiness” book tour stopped by my University of Iowa class. I could never have imagined how dramatically that hot August afternoon would change the course of my life. I have retold the story many times of how the students spontaneously followed you out of the classroom that day. Exactly three years later, I left my home, and position at the university, to follow you as well.” Yet in September of 2014, after Hsieh announced a major layoff of employees associated with the Downtown Project, Gould wrote that the business failures of its many ventures were not due to bad luck or “tough breaks” but to a “collage of decadence, greed, and missing leadership.” Gould went on to write, “While some people squandered the opportunity to ‘dent the universe’ others never cared about doing so in the first place.”

The dilemma is if you sell dreams you are less likely to focus on pragmatics. Hsieh had demonstrated his business creativity, his capacity to take risks and his shrewd judgement, but in leading his downtown revitalization project, and investing $350 million, he lost sight of business fundamentals. Zach Ware, a Hsieh confidant hired Andy White, who had been part of the startup community in Salt Lake City to run its $50 million venture fund. Before White’s hiring, “He was told that as part of the vetting process, he would be given a list of ten companies to evaluate. But after meeting Tony on the party bus, he was in. That list of ten companies never materialized; he had already passed Tony’s culture test.”[22]

This untutored decision flowed from Hsieh’s underlying philosophy that instead of assessing good business ideas or people’s business savvy, he, his colleagues and employees should focus first on “people and community,” what Hsieh called “return on community” rather than on the customary “return on investment." By 2014 this philosophy along with Hsieh's impatience led him to fund 60 to 70 ventures while providing them with only the most limited guidance and oversight. This despite the fact that many of the entrepreneurs, as well as Ware and White, were inexperienced. As Groth writes, “By contrast, Sequoia’s multibillion-dollar fund makes only a few deals a year, and has storied companies such as Google and Apple in its portfolio.” [23] One result, as Groth writes, was that, “Most Vegas tech startups focus on minor inconveniences with ideas like a garage sale app, a bowling app, a virtual assistant.”[24]Moreover, the startups that were focusing on return on community were not achieving return on investment. “They simply weren’t hitting their numbers because they were too focused on facilitating serendipity.” [25]By the end of 2014, Groth writes, “one thing was clear to many: Tony had lost interest in his Downtown project.” [26]

Let me suggest that the Hsieh’s “Return on community” or ROC, was a feature not a bug. Like Holacracy which disrupted Zappos and did little to advance the business itself, ROC was the result of Hsieh's own projections onto the arrangements he was designing and funding. The fantasy? A community of like-minded friends who could fulfill their dreams in a setting of collegiality and support, or according to its mission statement to create “the most community-focused large city in the world.”

 

Burning Man

 

Strikingly, as Groth writes, the Downtown Project “was inspired by the subculture at Burning Man.” [27]This is an annual festival that attracts 70,000 people and takes place in Black Rock, a temporary city in Northwestern Nevada. It combines the qualities of Carnival, a classical “happening," and a life-style fair with a focus on human potential practices. While it began as an off-center underground affair in San Francisco, it has become a social event attracting“social media influencers, celebrities and the Silicon Valley elite.” One of its central features and perhaps its raison d’etre is its ethic of “gifting.” Nothing can be sold at the festival, everything is offered for free. As one scholar writes,“Burning Man’s most striking and certainly most structurally significant characteristic is its ban on vending, advertisement, and any form of commercial activity in favor of a thriving gift economy in tune with the festival’s ethos of do-it-yourself creative entrepreneurship, participation, and involvement in the fostering of community.” 

 

It may seem strange that the Silicon Valley elite, who thrive on cutthroat competition in the high-tech economy, and who measure success by a company’s valuation when it goes public, would be drawn to a gifting community. But this is precisely the point. Burning Man share features with the paradigmatic "Carnival" Festival, like Mardi Gras in New Orleans. The Carnival features societal reversals. For example, describing Carnival in the Netherlands, one observer writes, “Carnival is the festival of reversal…During Carnival there is neither rich, nor poor, no successful entrepreneurs or lowly street workers, no black, no whites.” Burning Man does not so much reverse roles, though people’s social origins and class status may be obscure, as it reverses the nature of the ubiquitous commercial transaction, turning monetary exchange into gifting and reciprocity. In this sense it provides surcease from the chase and stress of commercial life in which even the elites face great risks and often fail dramatically.

 

But Hsieh misread the meaning of Burning Man, imagining that its principals could be applied to everyday commercial life, that gifting could replace exchange, and reciprocity, self-interest. This is why he overlooked the quotidian strategies associated with normal real estate development, a central feature of any plan to revitalize a downtown. Downton Las Vegas was exceptionally depressed. As one author writes, “For all intents and purposes, there was no such thing as “downtown” Las Vegas, which consisted of some older casinos and government buildings and nothing else. There’s no traditional employment or commercial core, and only one large office building. The Downtown Project was starting essentially at zero, with practically no assets and numerous obstacles.” 

 

In addition, while Hsieh hoped to create a community typified by entrepreneurial energy and decentralized initiative, a community of serendipitous collisions, he paradoxically created a setting centered on him. In an interview Groth wondered if Hsieh had become a cult figure. “I’ve struggled with that question a lot. Even to this day, (LH-before Hsieh’s death), I try to figure out what is really going on here. I’ve determined that it’s both. There are a lot of codependent relationships between Tony and all of the people working for him and with him. He rewards loyalty. He rewards people who spend time at the bar with him and the other leaders. There is very much a sense of, ‘The closer you get to me and the more you sacrifice for me in terms of spending time with Downtown Project leaders, the more access you’ll have to capital and the more access you’ll have to me.’ At first, I thought that’s interesting. Maybe that’s just how it is in the Silicon Valley culture. But then I realized that this is different. It’s more extreme and it’s even actually dangerous. A lot of people are burned out after years of trying to accommodate him and living in that way.”

 

Groth’s characterization of the milieu Hsieh created as a dangerous one is paradoxical but surely true. It is one consequence of Hsieh's aversion to structure, combined with his propensity to test people using indirection and signals rather than direct talk. A person in the community eager for attention and resources, could never be sure who was actually accountable for making decisions about spending and investing. All she would know was that Hsieh was at the Center of the whole undertaking. As Groth describes it in her book Hsieh created a kind of moveable feast visiting different bars, attending various festivals with an informal entourage of followers each one measuring their ongoing but never assured proximity to him. Were you an outsider, you had to decipher the signs of who was in and out. This created an undertow of chronic anxiety, the basis for Groth’s experience of the milieu's danger. It was one measure of Hsieh's own dark side, his suppressed omnipotent strivings, and his capacity to manipulate others.

 

A Suicide

Another signal of his dark side was his inability to lead the community in a grieving process when in January of 2014, a valued community member, and colleague, Ovid Banjeree, committed suicide. Instead he hung back. “After Ovik’s suicide, Tony stayed behind the scenes. When the community was looking to its leader for guidance, he stepped back behind the curtain, like Oz. Downtown Project brought in someone to handle grief counseling, but Tony never publicly addressed it.”[28] Ovik was a Zappos employee, and some months before his suicide he had written Hsieh an extensive memo on the management issues bedeviling the Downton project. 

 

It may seem strange that Hsieh would disappear when his followers most needed him. But since the undertaking represented in part his own compensatory fantasy that there could be a setting in which he and others would be loved simply for who they were, the suicide undermined the fantasy. Had Tony led the grieving process he would have had to have come into touch with its dark side, the ways in which his setting created stress and loneliness. Hsieh would have had turned inward, to “take back” his projection and own his own demons. He was simply not prepared to do this. Instead, he stood by his decision to remove the word “community” from the Downtown Project’s mission. “He later explained that ‘community’ implied that his for-profit entity would be taking on responsibilities that it never intended to handle. Downtown Project employees were instructed to stop using the acronym ROC (return on community) as well.” [29]In other words, in a gesture reminiscent of totalitarian settings, history had to be erased. 

 

Toward his death

 

We can’t surmise from the public record how Hsieh made sense of his journey, both its successes and failures. Hsieh stepped down as leader of the Downtown Project in 2014 after it laid off 30% of its staff. He stepped down as CEO of Zappos at the end of 2020. Over those six years he continued to live in an airstream trailer in downtown Las Vegas drawing I imagine on the emotional sustenance people offered him. Whatever his limitations they were surely still drawn to him as a creative and charismatic visionary. The pandemic of 2020 threw a monkey wrench in this setup. The parties, the moveable feast that he valued so deeply, were now off-limits. As we have seen, his response however was far from pragmatic. I speculate that his feelings of isolation drove him crazy. How else to explain that he in fact became a parody of himself?  He left Las Vegas for Park city Utah paying people for no show jobs if they promised to be his friends. He turned his energy and sense of agency against himself becoming a biohacker to control not his milieu, a business, or even other people, but his own body. He became a drug addict. To repeat what Jewel wrote, “If the world could see how you are living, they would not see you as a tech visionary, they would see you as a drug addicted man who is a cliché.” 

 

This is tragic but also a measure of his tragic flaw. He was enormously creative. People loved him for the way he combined moral vision and good business judgment, creating on the way opportunities and excitement for others. But his drive was compromised insofar as its taproots were his own unmetabolized suffering of a trophy child. But the culture also used him up by projecting on to him its own utopian strivings as if he could deliver us from the alienation and unhappiness that accompanies everyday life. 

 

In Civilization and its Discontents Freud imagined that as society grew in complexity, and social constraints grew accordingly cultural repression would grow. People’s instinct for pleasure, for satisfaction would remain unabated whatever restrictions they faced. The resulting tension between instinct and constraint could be managed only if people censored themselves using their own feelings of guilt as the cudgel. They would repress themselves but at a growing cost. This was the basis for civilization’s discontents. 

 

Can I offer a friendly amendment to this proposition and phrase the difficulty differently? Our utopian strivings suggest that civilization is an attack on our narcissism. As essential as hierarchy is, it means adults must subordinate themselves to their superiors who may or may not be more deserving or more talented. And when they are, their capability can symbolize our own inadequacy. Social exchange represented by the market means that our social value is determined by how others gauge our usefulness. We are not loved for who we are but rather for the benefit we afford others in a process of objective exchange. 

 

Hsieh fell victim to our utopian strivings, as represented in the end of hierarchy and the end of exchange. We know from history that the pursuit of utopia comes up against what Immanuel Kant called the “crooked timber of humanity” out of which “no straight thing is ever made.” That is why the pursuit of utopia can trigger terror. Pol Pot who sought a communist utopia in Cambodia, emptied out the cities and killed the intellectuals, or sometimes just people who wore glasses. He needed a blank slate. The wisdom of any social arrangement is to build guard rails against human evil and find reasonable ways to link what Adam Smith termed people’s self-interest and self-love to valued social objectives. Utopia is best held in abeyance, an ideal to provoke our instinct for improvement, but never to be grasped whole. We need what my colleague Howard Schwartz calls “objective self-consciousness,”[30] the view of ourselves as others see us, as vehicles for their own satisfaction. Collectively we can and must build better social arrangements, knowing that the better world we design has been built for all of us, but not for any one of us.

In sum

Tony Hsieh’s death and life is a case study in the power of projection and fantasy in group life. Hsieh wedded his enormous talent and creativity to the work of undoing his earliest psychological injuries; the suffering of a trophy child, the experience of omnipotence when he fooled his parents. This is an impossible task. We can’t unring the bell, we can only hear its resonances, its vibrations, and accept them as one foundation stone of our character. In flight from his past, Hsieh created Zappos in his own image, a setting that defied estrangement and promised the fusion of self and work and self with others. With each failure he doubled down, 

 

But he was not alone in this impossible quest. Other leaders, opinion makers, executives, writers, teachers, elevated his undertaking. Just for a moment they saw in Zappos, a miraculous creation; the place where authority and social exchange were eliminated, where people lived as equals in a setting of complete and forgiving reciprocity. This surely inflated Hsieh, exaggerating his omnipotence, so much so that he went from creating an organization to creating a city and, and as he told a New York City audience, “if you fix cities, you kinda fix the world.” He was surely headed for defeat. Isolated in the pandemic, he turned his omnipotence on himself, biohacking his body while buying friendships with money. People’s projections into him were temporary, perhaps even careless. He was alone in his death.

 

 

 

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[1] Aimee Groth, The Kingdom of Happiness: Inside Tony Hsieh’s Zapponian Utopia p. 100

[2] Tony Hsieh, Delivering Happiness: A Path to Profits, Passion and Purpose, p. 78

[3] The Kingdom of Happiness, p. 11

[4] Delivering Happiness, p. 12

[5] The Kingdom of Happiness, P. 218

[6][6] Ibid, p.218

[7] Ibid, p. 145

[8] Ibid, p. 145

[9] Delivering happiness, p. 150

[10] The Kingdom of Happiness, p. 17

[11] Delivering Happiness, p. 9

[12] Ibid, p. 207

[13] Kingdom of Happiness, p. 6

 

[14]Ibid p. 6

[15] Ibid, p. 108

[16] Delivering Happiness, p. 78

[17] Sigmund Freud, The Future of an Illusion, SE Volume XX1, pp. 64-65

[18] Ibid p. 70

[19] Ibid, p. 44

[20] Ibid, p. 60

[21] Ibid 

[22] Ibid, p. 27

[23] Ibid, p. 96

[24] Ibid, p. 93

[25] Ibid, p. 94

[26] Ibid, p. 158

[27] Ibid, p. 84

[28] Ibid, p. 116

[29] Ibid

[30] Howard Schwartz, Society Against Itself: Political Correctness and Organizational Self-Destruction, London and New York: Routledge, 2010, p. 176