You founded Joie de Vivre when you were 26 years old. What did that decision look like? Were you fearful and, if so, how did you overcome it?
Chip Conley: Being an entrepreneur, especially when you’re inspired by an idea that you’re channeling, is sort of like immaculate conception [laughter]. You’re in a place where, with each passing month, you feel more pregnant. I don’t mean as a man to be disrespectful in any way to the trials and tribulations of being a pregnant mother, but I do think there are a lot of similarities. It feels like something you have to do. It actually feels at some point like you don’t have a choice. Something is implanted in you. I have felt that way a few times with some of my various businesses, but with Joie de Vivre I felt it for sure.
I got to know Bill Graham, a famous concert promoter back in the ’70s and ’80s, when I was working for a commercial real estate development company after business school. I didn’t love what I was doing. I believe you have three choices in your work – it’s either a job, a career, or a calling. I thought I had a calling, and soon after I took the job I found out that it was just a job. I really wanted a calling. I could see Bill Graham had his calling as a famous concert promoter. I was working on a project with him as part of my job, and, at some point, he said to me, “I don’t know what you’re doing in your company right now, but what San Francisco needs is a great place for bands to stay.” As a concert promoter, he was bringing musicians to town all the time. He said, “The hotels here are either really expensive and old-school or really generic. There’s not much that’s interesting.” This was the mid-1980s. Boutique hotels were just getting off the ground.
So, on my 26th birthday, I finished a business plan for Joie de Vivre, which was a very impractical name for a company. It was also a really soulful name for a company because our mission statement was also the name of the company. How many companies out there in the world have their mission statement in the name of the company? Our mission statement was to create “joy of life.”
Long story short, I was young enough to feel like if I failed in my mid-to-late 20s, it would be a badge of courage. I felt a lack of fear because, when you’re 26, you don’t think much about what could go wrong. It’s harder as you get older, as you have kids, when you get stuck in your ways – that’s when it’s easy to think of all the things that could go wrong.
Is there anything that you know now that you wish you had known at 26 while starting Joie de Vivre? Is there anything you would have changed?
CC: One thing that I did with my team, that was brilliant and incredibly stupid at the same time, was create 52 boutique hotels mostly in Northern California, some of which we owned and some of which we just managed. In the 40 to 50 percent of cases where we owned the hotel, for each one we had a different set of partners. This gave us a lot of flexibility, because no one investor group controlled us, but it was really problematic in terms of how many different relationships we had to take care of – at one point we had 180 different partners. It taught me a lot about who I wanted to do business with and who I didn’t want to do business with, which was a very good lesson.
“Culture is the most important strategic differentiator for any company.”
From the standpoint of being a leader, how did you get your core team to handle the two downturns that you went through – the dot-com bust and the 2008 recession – especially when dealing with such a vast network?
CC: I’m so proud of this. During the dot-com bust, revenues in San Francisco for hotels dropped about 35 percent over a four-year period. In Silicon Valley, where we had a bunch of hotels too, they dropped 52 percent. It was a depression, not even a recession. What I’m proud of is that we didn’t lose anyone. We did two key things:
1) we did not lose any of our senior people – they all took 10 to 20 percent pay cuts and had a pay freeze for three to four years, but we didn’t lose a person, and 2) on the other extreme, we didn’t lay anyone off. We were the only hotel company in the Bay Area that didn’t. We cut salaries for the people who could afford the cut, so it gave us the ability to address the hierarchy of needs for the people at the bottom of the totem pole in the company – the hourly workers. While occupancies dried up and it got a lot quieter in the hotels, rather than having housekeepers or bellmen or front desk hosts have the sense that they didn’t know if they had job security, we secured the base of the pyramid so people actually felt safe and not fearful. They didn’t feel anxious about losing their jobs, so they not only worked better, but they enjoyed what they were doing more.
I like to think of it like a college rowing team. You usually have eight people on a rowing team and a coxswain – and if they’re doing their jobs well and they’re working together at the same time, then a somewhat miraculous physics proposition happens – the boat starts to actually elevate out of the water. The reason a boat that is higher in the water goes faster is because it has less resistance. That’s what a great team does. That metaphor completely defined the 15 key leaders in our company during that downturn.
During the downturn, we’d have weekly executive committee meetings with the 15 of us and we’d end those meetings in an awful place with everybody asking, “How are we going to get through this?” Since emotions are contagious – I actually believe that CEOs are Chief Emotion Officers because emotions are contagious – what we wanted to do was create an environment where the emotions of anxiety and depression were not feeding off of each other. So I said, “Next week, come to the meeting ready to tell us about someone from the company who did something amazing, and why we should recognize them. Then someone else from a different team and a different part of the company will actually go and say thank you to that person.” We would only spend 10 minutes talking about these examples, but what happened was that we created a catalytic ripple effect, but instead of the ripple of anxiety, it was the ripple of love, gratitude, and recognition. Three things happened as a result of that:
1) It shifted the energy of the people in the field because they were getting recognized. Most people are used to working in companies where they only catch you when you’re doing something wrong, and if they do catch you when you’re doing something right, they don’t say thank you. They just felt better and it showed.
2) It shifted the energy of the executive team. We got back to the mission and the meaning of why we were doing this in the first place. It was about “joie de vivre.”
3) Because of how the executive team was expressing gratitude, we created cross-departmental relationships that were critical in the downturn.
“For how many hours we work each week, especially in this country, to not have and find joy in what you’re doing is really a missed opportunity. Historically, we’ve thought that success drives happiness. The shift of saying, ‘Happiness drives success,’ is an important one.”
What other kinds of concrete tactics or techniques do you use for employee engagement?
CC: Culture is the most important strategic differentiator for any company. Culture needs to be intentional. Employee engagement tactics should come down to asking, what are the things you’re doing in your company to be intentional about your culture? Do you have core values that weren’t decided by a senior executive team alone, but feel like they flowed up from everybody? How do you create cultural ambassadors as you grow the company? Being intentional about democratizing culture is critical.
I give a lot of talks at other companies and it’s always fascinating to me when the CEO comes up and whispers to me, “I don’t think we have a culture.” [laughter] I will say back to the CEO, “Well do you have a personality?” To which they’ll say, “Of course I have a personality!” I respond, “You have a personality. The company has a culture. If you actually don’t think you have a culture, you probably have a bad culture.”
Is this something that you’ve felt in your heart since you were 26 starting that first hotel?
CC: Oh, it started well before that. My first job was at McDonald’s and I hated it. I just couldn’t believe that it was just a world of work. I didn’t have the language of job versus career versus calling back when I was 26, but I did believe that, for how many hours we work each week, especially in this country, to not have and find joy in what you’re doing is really a missed opportunity. Historically, we’ve thought that success drives happiness. The shift of saying, “Happiness drives success,” is an important one.
How did you go from hating your first job at McDonald’s to deciding to study business?
CC: If you told me at age 13 or 14 when I was working at McDonald’s that I was going to go into business, I’m not sure what I would have thought. To be honest though, it seemed very practical, but what became clear to me is that I love the creativity of business. I love the capacity of an entrepreneur to be creative, and having creative freedom meant a lot to me. I’m definitely an artist at heart. To quote Khalil Gibran in The Prophet, “Work is love made visible.” I really wanted my love for creativity to be deeply embedded in the company.
An important part of my success has been staying true to that creative spirit. Everybody gets very focused on creativity and innovation, but at the core of both is curiosity. I think that curiosity is starting to get the respect it’s due – creativity and innovation have been on front stage, and curiosity has been behind the scenes. To use a business perspective, Peter Drucker, a famous management theorist, basically said that curiosity was the fuel of creativity and innovation, and if you’re curious, you’ll live a long time. Curiosity is a really important component of being a great entrepreneur. Everybody thinks that the best leaders need to have all the answers. Really, the best leaders often have the best questions.
How do you maintain your curiosity, as well as your sanity?
CC: The difference between workaholism and having a calling is not evident on the surface when you study someone, because it’s what’s going on inside. If you’re a workaholic – and I have some workaholic tendencies – there’s an addiction that’s driving you, and the purpose of the work is to distract you from something else. It’s fear-driven. A calling is quite different than that. Instead of being fear-driven, a calling is love-driven. In both cases you may lose track of time. In both cases you may lose hours of sleep. For me it was a combination of workaholism and calling, but it was 80 percent calling and 20 percent workaholism. I loved what I was doing. It didn’t mean I didn’t have a full life; I have. I’ve had two long relationships. I have two biological sons with a lesbian couple. I have a 38-year-old foster son who has been with me since age 13. I have three grandkids, one of them age 20. And I have just the most bountiful collection of friends and interests.
As an entrepreneur, it’s important to be focused in the early years, but if you have to stay so completely focused on your business to the exclusion of so much else beyond, say, the first three to five years, then something went wrong. That will lead to narrow-mindedness. If you’re narrow-minded and you’re a successful company, someone else is going to come along and knock you off your pedestal, because you’re not seeing the rest of the world.
An entrepreneur should remind him or herself every year, around the New Year, why he or she started the company in the first place. For me, I started Joie de Vivre because I wanted creativity and freedom. About 22 years into the company, when I had a flatline experience, I woke up and realized that I didn’t have creativity and freedom anymore. I had become the CEO of a company with 3,500 people and a quarter-billion dollars in sales, and I pretty much had become everything that I didn’t want, which was structure and administration and running a large operation. I had stopped doing my annual year-end inventory. I had stopped asking, “How am I feeding creativity and freedom in my work?” That’s when I realized, “Wow, is there a way for me to go back to creativity and freedom?” At that point, I really said, “No, I have to find it somewhere else.” So I spent the next two years figuring out how to sell the company and then create space in my life for what was supposed to happen next.
Can you tell us more about your flatline experience and the decision to step away from Joie de Vivre?
CC: In 2008, I broke my ankle sliding into third base while playing baseball at a bachelor party with the mayor of San Francisco, Gavin Newsom, at AT&T Park. When I went to the hospital, they fixed my ankle, but they didn’t notice a cut on my leg that I hadn’t noticed either. A few days later, I was in Montana at Gavin Newsom’s wedding, and I got really sick because I actually had fertilizer in my leg. My leg went septic. I was going to have to have my leg amputated in Montana, but instead they put me on a strong antibiotic, and I came back to San Francisco. Rather than staying at home, which is probably what I should have done, I had a speech in St. Louis and went off to give it while on crutches. Afterward, when I was signing books, I just slumped in my chair at one point and went unconscious for three minutes. I woke up on the floor, and paramedics were on their way. Fortunately, my heart didn’t stop until the paramedics got there. Then, over the next 90 minutes, my heart just kept stopping in the emergency room and the ICU. There was no explanation for it – I think maybe I had an allergic reaction to the antibiotic.
While in the hospital, I had Viktor Frankl’s book Man’s Search for Meaning, which is about his concentration camp experience, in my briefcase. I had been going through a hard time and I was trying to figure out, “What’s going on in my life?” In my hospital bed I sketched out an equation: “despair equals suffering minus meaning.” I distilled Man’s Search for Meaning to an equation. Suffering is a constant. If you’re a Buddhist, you’re familiar with this concept, but if you’re not a Buddhist, just know that suffering is always going to be there. However, meaning and despair are variables, so if you increase the meaning, you decrease the despair. That became my leadership perspective for the next two years as I was getting the company ready to sell.
In November 2008, we had a leadership off-site with our top 80 people in the company. It was so clear at that point that we were looking at a bloodbath of a year in 2009, for our company and for hotels and travel in general. I was supposed to give a cheerleading speech, and instead I threw away the speech and said, “Well, some of you don’t know I had a flatline experience three months ago. Some of you do. The main thing I’ve learned in the last few months is this equation. I want to spend the next hour talking about how we, as leaders, create meaning in our work, because if we do this with the 80 of us, the 3,500 other people in the company will feel it, and we can actually teach it.” At that point, I started actually teaching emotional equations and emotional intelligence classes during the downturn to line level employees, as well as managers. Even a flatline experience can give you the opportunity to say, “What’s the leadership lesson in that?”
“Everybody gets very focused on creativity and innovation, but at the core of both is curiosity.”
After you decided to sell the company, what did that two-year process of preparation look like for you? Was there grievance or doubt?
CC: Yes. There were a lot of things. During that time from 2008 to 2010, our company was just going through an awful time. We were losing money. We had hotels that were in financial disarray. During the dot-com bust, I felt like a gladiator and my job was really to get everybody pumped up. During the Great Recession, I felt like a prisoner. I owned the management company and was a partner in so many of these hotels. I felt stuck. I felt the prison of being the founder and the CEO of the company because I couldn’t just float my resume and leave. It was really important for me to get clarity about the idea of moving on to make sure that I was ready to move on.
After the flatline experience in St. Louis, I was supposed to go to Houston to do a half-day seminar for 150 entrepreneurs. I was out of the ICU in the waiting room and my father showed up. We still didn’t know what was wrong with me, and I said, “Can I go to Houston? There are over 100 entrepreneurs there, and they booked me a year ago, and I really want to give this talk.” My dad said, “Yeah, rock on, let’s do it.” The doctors however said, “We don’t know, just have your dad really watch you.” Everyone else in my life was telling me to get home.
But, I went to Houston and did this half-day seminar. During my four-hour session with these entrepreneurs, my dad was in the back of the room just watching me like a hawk. On the plane back to San Francisco my dad said, “Chip, I just have to tell you – I have never seen you give a speech or do a creative workshop like that before. I’ve seen you give so many speeches before, but I guess I just had never thought of it as something you could do for a living. I came to St. Louis a couple of days ago to make sure you didn’t die. Tonight, I saw how you want to live. I want to help you figure out how to sell your company so you can truly live. I don’t want this experience of you having to be the identity and the CEO of your company to kill you.”
Peak, my third book, did really well and it had an effect on people in terms of how to think differently about business. I had this feeling after it came out that, “This is my next calling.” I had built my identity on my calling of being the CEO and founder of Joie de Vivre and really helping to grow boutique hotels’ presence, but I realized that my calling for it had sort of evaporated.
The truth about departing from a company as an entrepreneur is, if you do it right, you will have gotten it all settled, internally, way before the rest of the world has it settled. When it actually happens, you’re emotionally and spiritually prepared for it. You’d better be because there are a lot of people who are going to be distraught about you leaving.
Everybody was saying, “Don’t sell now. This is the worst time you could sell it. It’s not going to be worth much money.” I just didn’t care. My life was a lot more important to me, and as it turns out, we did fine. I didn’t sell any of the real estate, I just sold the management company and the brand, and then later the real estate values went way, way up. So…
“Everybody thinks that the best leaders need to have all the answers. Really, the best leaders often have the best questions.”
Let’s discuss your role at Airbnb. Has your definition of hospitality shifted at all now that you’re working in the sharing economy?
CC: My definition of hospitality has always been, “A generosity of spirit from the heart.” If it’s not from the heart, then it’s service. Service is from the head – hospitality is from the heart. I believe that our best Airbnb hosts are absolutely great examples of hospitality, because there’s a generosity of spirit coming from the heart with those people.
However, the standard deviation of an Airbnb experience is more extreme than in a hotel. In a chain hotel, part of the brand promise is predictability and no surprises. Airbnb is sort of the opposite of that. It’s really different and you’re not always sure what you’re going to get. Part of my role in the company and part of what we’ve been moving toward is trying to create more dependability, but we don’t want to create consistency. Consistency would mean the same thing over and over again – that’s not what we are. Dependability means we are able to back up a situation if something goes wrong. We want to help hosts deliver on the promise of what their listing says it’s going to be.
You have been regarded as one of the more innovative CEOs in the world. Beyond curiosity, are there other drivers of innovation that you’ve identified?
CC: There’s an art and a science to innovation. I think some of it is creating the habitat for great ideas to ferment and to grow, for yourself personally and for the organization. I’ve learned over the years that there are certain activities that help me get into a creative flow – running, especially on a beach, and anything related to water, like taking a bath or being in an ocean. Sometimes the best ideas come in the shower. So how do you create that creative habitat for a team? Brian Eno is a musician and he has a concept called “scenius” – it’s the idea that genius comes from the scene, and the scene meaning the certain kinds of spaces, communities, or places that create a scene or a space where genius is more likely to occur. That is, I think, part of the reason why off-sites are such a helpful way to potentially get there. If someone needs to break through a conceptual block, they might not be able to do so in an office. One part of innovation is simply understanding what the best habitat is for yourself and your team.
For Joie de Vivre, our innovative approach to creating hotels started with the very first hotel, the Phoenix – a broken-down motel in a bad neighborhood. We had a premise that every time we created a hotel, it would be based upon a magazine and five adjectives. Magazines and boutique hotels have something in common: they’re both very niche and very lifestyle oriented. When we created the Phoenix, we knew the spirit of the place would be musicians and creativity, so we decided Rolling Stone Magazine would be our touchstone for personality. We came up with five adjectives that defined Rolling Stone: funky, irreverent, adventurous, cool, and young at heart. Those five adjectives defined everything we did – from the staff we hired, to the decor, to the restaurant, the kinds of services we offered, even the name.
Over time, we learned that this is a great organizing principle to make sure everybody – the designer, the contractor, the sales team – is on the same page about the soul of the hotel. What was miraculous, and something we noticed over time, was that the people who fell in love with the hotel would have used those same five adjectives to describe themselves. The boutique hotel was, in essence, a mirror for the aspirations of the customers. That’s why I said early on in Joie de Vivre, “We are not boutique hoteliers; we are in the business of identity refreshment.” This is why people fall in love with our hotels – it refreshes their identity. In that space, they are the best version of themselves.
Innovation can benefit from structure, but structure alone doesn’t do it. There has to be a seed of inspiration and art that is driving it. The best way to plant seeds, the artful seeds that are going to grow, is to get out of your normal space. I’m not talking about off-sites – go to the zoo, or go to a museum. I actually think it’s really good to go to spaces where creativity is already happening, or things are happening, and you can think in ways that you wouldn’t have otherwise.
It might just be our theory, but we believe that this world of extreme transparency and information sharing is leading to a world where the karmic capitalist cycle is actually going to happen a lot faster and we’re going to get to a place where businesses have to do good.
CC: It’s been said that “reputation is the new currency,” and there’s a lot of truth to that. There’s a book that just came out about reputational currency, which is the idea that your reputation is built upon both your observable actions and your non-observable actions, which are based upon people’s perceptions of you. That is so powerful – and dangerous if you are wreaking havoc in the world. The more the Internet becomes a fundamental piece of our lives, the more this will be true, because the Internet provides the medium for people to have more transparency than they had before.
Walmart is a bit of an example of this. A few years ago, its stock price basically tanked and wouldn’t go anywhere, even though the company was doing really well from a financial perspective. It had everything to do with a sense from investors that the company’s reputation and its growth were at risk because of bad karma. It influenced the stock price, and it ultimately influenced the company to get more eco-savvy and made it start looking at some of its HR practices. Walmart has a long way to go, but the fact is, it started looking at it because it realized there’s a lot of communities that don’t want its stores there.
What advice do you have for entrepreneurs?
CC: There are three things:
1) Don’t take it all so personally. That’s hard, but that’s number one. You can think that a business is going to scar you if it doesn’t succeed. A lot of it is luck and timing, and you learn so much along the way. That doesn’t mean you shouldn’t work hard; you just shouldn’t take it personally if certain things aren’t working right. You have to be resilient, too, because timing and luck can change.
2) Surround yourself with people who are outside of the business, who are not living a rollercoaster life. They will give you perspective, whether it’s by talking about their children or talking about your children (the children you haven’t seen much lately!) [laughter] – or just by allowing you to move out of your echo chamber to actually see that there are other things happening in the world.
3) Take care of yourself. Whether it’s exercise, diet, or sleep, do things! Get a massage or whatever you need – it will help to make sure that your physical and spiritual form is still operating well.
CHIP’S ADVICE ON FINDING INVESTORS
In Peak: How Great Companies Get Their Mojo from Maslow [Chip’s third book and a favorite of Zappos’ CEO, Tony Hsieh], there are three chapters that are specific to the investor and how you can apply Maslow’s hierarchy of needs to the investor. It helps as an entrepreneur to ask and understand the question “What kind of investor are you dealing with – a transactional investor where it’s all about return on investment, a relationship investor who’s really looking to build a relationship and maybe do multiple investments with you, or a legacy investor who is really focused on the mission?” If you’re going to do a long-term project, you’d better have legacy investors. If you have only transactionally aligned investors, you’re just going to find that those are the people who want to make as much money as quickly as possible, which is not what you’re doing usually if it’s a mission-driven organization.