back to

Zappos CEO Tony Hsieh's failed city building experiment


Adding to the list of West Coast urban housing experiments is Zappos CEO Tony Hsieh’s Downtown Project, an urban planning scheme with a start-up twist. Though Hsieh is the successful founder of two start-ups ventures, his city project is proving more of a challenge. Below, Aimee Groth explains what exactly Downtown Project is, and considers why, five years on, it has largely failed. Read in full via QZ here.

In 2012, Zappos CEO Tony Hsieh cast a compelling vision: to create the most community-focused large city in the world. It would be anchored around his online shoe retailer’s new headquarters in downtown Las Vegas. He committed roughly $350 million of his personal capital (from Zappos’s sale to Amazon in 2009) into fulfilling the vision through an investment vehicle he called Downtown Project.

To rally interest and participation, he also stated his intention to create the co-working capital of the world, the shipping container capital of the world, and the fire capital of the world—all within five years or less. This month marks the project’s fifth anniversary. It’s safe to say it has so far fallen short of its urban utopian mission, largely because it has denied crucial pieces of what makes a city a city.

Hsieh compared his quest to creating the “four-minute mile” of city building.” After the first man broke the four-minute mile, there was a domino effect around the world, he explained to audiences on his speaking circuit. He said he wanted to complete in five years what would normally take 15 to 20 years.

To accomplish this, he devoted $200 million to real estate over some 60 acres of land; $50 million to building small businesses within that footprint; $50 million to tech startups, initially prioritizing those willing to move to Vegas; and $50 million to arts, education, and culture in the area. The idea was to create a “City as a Startup,” applying the same iterative processes that define tech startups into the brick-and-mortar walls of a city.

Around 300 entrepreneurs actively participated in his experiment. Hsieh personally recruited many them. Influenced by Harvard economist Edward Glaeser’s Triumph of the City, Hsieh’s goal was to increase the population density at a rapid pace in order to catalyze innovation. Moving fast and testing out a wide range of ideas quickly was more important than consistent and concentrated investment in a few. That played out in the form of high exuberance in the early years, offset by a trail of closed businesses and some real tragedies. Once the cash ran out, many left Vegas.

And therein lies a missing piece—local residents were not a key part of Hsieh’s revitalization plans. In line with his hiring philosophy at Zappos, Hsieh and his deputies prioritized culture fit over skill set. Hsieh spent his time on the festival circuit, recruiting talent that he crossed paths with at far-off locations like Burning Man, SXSW, and TED. He explained his hiring decisions by likening Downtown Project to ride-hailing app Uber, emphasizing the value of inexperience: “Uber wasn’t founded by people who came from the taxi industry.”

This strategy created an environment that reflected Hsieh’s distinct tastes. Urbanist Leah Meisterlin, who is an assistant professor at Columbia University, observed this in her report, “Antipublic Urbanism: Las Vegas and the Downtown Project” for The Avery Review. “Walking along Fremont, I felt no active excitement, spontaneity, or curiosity,” she wrote, “but rather the growth of a scripted narrative and a correspondingly enforced restraint.”

In 2012 and 2013, when the money was flowing and thousands of onlookers took advantage of Hsieh’s open invitation to tour downtown and stay in one of his 100-some crash pads for free, the area was teeming with people. But Hsieh’s $350 million went fast, and the experiment scaled back significantly in 2014. Numerous projects were cut with little to no warning; follow-on funding and bridge loans were rare to nonexistent. Many dreams were shattered that year. A month after a round of layoffs at the Downtown Project, Hsieh stepped out of the limelight and moved from his central location at the Ogden, a luxury apartment complex on Las Vegas Boulevard, to an airstream trailer park on the edge of downtown.

*Image: Many of Zappos CEO Tony Hsieh’s followers launched their companies in Container Park, a small business incubator, via QZ