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Tony Hsieh explains why he sold Zappos, how he reinvented its corporate culture and what he thinks of Amazon

"It’s a work in progress, like any startup."

Recode / Alex Ulreich

Depending on whom you ask, Zappos CEO Tony Hsieh is either a prophet or a madman for instituting the leaderless "holacracy" management structure at the company he founded.

But according to what Hsieh told Kara Swisher onstage at the first Code Commerce Series event in Las Vegas, it helps Zappos serve both its employees and customers better. And Zappos parent company Amazon knows this.

"Amazon knows the value of customers in the long term," Hsieh said. "Most Zappos employees wouldn’t do well in an Amazon environment and vice versa."

Under holacracy, Zappos employees don't have managers. Instead, people take on different responsibilities that suit their skill sets. Hsieh often talks about going "teal," or becoming a company that lives and breathes its declared set of values.

"We’re moving from a system most corporations are designed around, command and control, to one that’s more self-organized, self-managed," Hsieh said.

As for the business end of Zappos, Hsieh said that the company is still figuring out what its place in e-commerce will ultimately be.

"We use the word 'wow' a lot — the idea of free returns was a big wow. Then when we encouraged customers to call our 1-800 number, that was a big wow," Hsieh explained. "As everyone moves more toward being more high-tech, we’re actually moving more toward humanizing. When we get that right, we have a customer for life."

Another high-profile project of Hsieh's was his $350 million effort to turn the Downtown district of Las Vegas into a tech entrepreneur village. The effort has not been a raving success; Hsieh stepped down from its leadership amid crisis in late 2014.

So what happened?

"It’s just what it is to be an entrepreneur. Not every venture is going to work," Hsieh said.

Hsieh thinks that people in the media pay attention to the sheer outrageousness of things like holacracy or the Las Vegas project, instead of the core concepts they represent.

"The media focuses on holacracy; my focus is on self-management," Hsieh said before pausing. "Use a rainforest as an example. There’s no CEO of the rainforest."

Correction: A previous version of this article attributed the line, "But a lot of hope was dashed. It's not as easy to create a city," to Tony Hsieh. It was Kara Swisher who said it. We apologize for the error.

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