Zappos CEO Tony Hsieh believes rave culture holds a key to business strategy

LAS VEGAS, NEVADA — Electric Daisy Carnival (EDC) is one of the largest electronic dance music festivals in the world, drawing some 400,000 revelers from around the US and beyond. Among them is Zappos CEO Tony Hsieh, whose Amazon-owned online shoe company is headquartered just 12 miles from the Las Vegas Motor Speedway, where the event takes place. The three-day festival, which features more than 200 DJs, is a place where Hsieh brings together those closest to him to establish cohesiveness within his tribe.

The Zappos CEO shared his fascination with rave culture in his 2010 book, Delivering Happiness, and has tapped into it throughout the years, not just recreationally but also as a business strategy. In Delivering Happiness Hsieh recounts a rave he attended in 1999, an activity he took up after selling LinkExchange to Microsoft:

The entire room felt like one massive, united tribe of thousands of people, and the DJ was the tribal leader of the group. … It was as if the existence of individual consciousness had disappeared and been replaced by a single unifying group consciousness, the same way a flock of birds might seem like a single entity instead of of a collection of individual birds … I made a note to myself to make sure I never lost sight of the value of a tribe where people truly felt connected and cared about the well-being of one another.

On Hsieh’s party bus headed to EDC on June 21, around 25 of his friends (and friends of friends) mingled while some took shots of Fernet, and most were dressed in rave attire: bright neon colors, black leather, LED lights, flower crowns. Hsieh was dressed in all-white.

Hsieh’s bus has seen many seasons of partygoers. On the last night of EDC, on board were a number of former employees, some of whom have taken new roles within Hsieh’s ecosystem of startups, and others who’ve left Las Vegas for San Francisco and Los Angeles. Three-and-a-half years into Hsieh’s Downtown Project (DTP) revitalization effort, things have not gone as planned: There have been a number of startup failures, layoffs and restructuring within DTP, restaurant and bar closings, but most crushingly, suicides within the community that drove a number of followers away from a place that wasn’t becoming the entrepreneurial utopia they were pitched on. The streets in the Fremont East District of downtown Las Vegas are mostly empty during the day—not the place of collisions and connectedness that Hsieh had envisioned.

  “I like being around people when they are experiencing the emotion of awe, which probably happens relatively rarely with most people.”  

Compounded with a management experiment at Zappos that has hit resistance and led to at least 14% of the company accepting a voluntary buyout, Hsieh is in uncharted territory. Those close to him say that the losses and the subsequent press are taxing on him. That’s why events like EDC are so important to Hsieh; they remind him of his original motivations.

EDM (electric dance music) culture is governed by a code of conduct: PLUR, short for “Peace, Love, Unity, Respect,” which protects the ethos around self-expression, and is a catalyst for group synchronicity. Hsieh tells Quartz that PLUR has influenced the culture at Zappos. In a 2014 interview with Playboy, he explained that rave culture introduced him to the “hive switch,” where people organize themselves for the greater good, like bees that live together as a unified force. It’s a concept that Hsieh has pursued over the years and has elevated with his goal of making Zappos self-organizing.

Jenn Lim, a longtime friend and CEO of Delivering Happiness, a company culture consultancy that spun off from the eponymous book, met Hsieh during the height of the rave era during the dot com boom. “There was the convergence of those two things [the rave era and dot com boom] and that will never happen again,” Lim tells Quartz. “It definitely was a pivotal time in [Tony’s] life and in my life in terms of what I went through in coming across that culture and how it shapes and informs different things. … There is this greater collective consciousness as a global society. You don’t have to call it happiness; it’s well-being, purpose, or PLUR.”

The last night of EDC brought Hsieh, who’s attended for five years, to the VIP section of one of the main stages, where he broke away from the group and stood alone watching a massive fire display at one of the DJ stages. He tells Quartz that “EDC definitely has aspects of that original rave culture, but it’s much more of a production [than] more participatory. Burning Man is probably the most participatory culture. … I like being around people when they are experiencing the emotion of awe, which probably happens relatively rarely with most people.”

Hsieh looks for figures who inspire awe to speak at quarterly Zappos All-Hands meetings; previous guests include magicians and futurists like Jason Silva who speak on the topic. Research shows that awe is a powerful emotion humans need to stay healthy, and when experienced with others, it creates a feeling of connectedness. Invoking a sense of awe is something that Hsieh has tried to create downtown by placing a 40-ft. preying mantis art installation from Burning Man that spews out fire a few blocks from the Zappos campus.

  “For many people, freedom is being told what to do.”  

Beyond the flash of installations and party atmosphere lie management principles that seek to bring cohesiveness and agility into company culture. The principles of PLUR are similar to those behind TEAL, a management system that Hsieh is implementing through his ongoing experiment with Holacracy, a system that facilitates self-organization. In the book Reinventing Organizations, author Frederic Laloux says that TEAL organizations strive to operate as a living thing:

Change in nature happens everywhere, all the time, in a self-organizing urge that comes from every cell and every organism, with no need for central command and control to give orders or pull the levers. … Teal Organizations have found the key to operate effectively, even at a large scale, with a system based on peer relationships, without the need for either hierarchy or consensus.

Daniel Mezick, an Agile business consultant who has been following Hsieh’s leadership at Zappos, says that “the reality is there’s a whole emerging discipline around social system design that’s just becoming, in part thanks to Tony,” although Mezick has expressed concerns about the way Hsieh is implementing these new strategies. “People are very influenced by system dynamics and the way authority is distributed. Holacracy is the first pre-fabricated social system design [to capture the attention of the public].”

In the early hours of the morning, a small group of people followed Hsieh out of the VIP section and back to the party bus. Within that group was Anthony D’Onofrio, the global community manager for Ethereum, a cryptocurrency platform designed to evangelize the blockchain.

D’Onofrio tells Quartz: “Only around 20% of the population actually want to be leaders,” he said, weaving through the crowd. “For many people, freedom is being told what to do.” He says that he’s not citing any hard data, but “an argument could be made based on the way humans have evolved into tribes.”

For Hsieh, he’s concerned about maintaining his tribe, which has been disrupted on a larger scale as of late. It remains to be seen whether Hsieh can turn around Zappos and his efforts downtown—and create the unified place that he once envisioned it to be, sort of like the raves of his 20s.

home our picks popular latest obsessions search