Urban Renewal, Corporate-Style

Zappos.com founder tries to resurrect downtown Las Vegas.

Before Facebook, there was Babylon. Before Twitter, Rome. Cities have always served as social networks, exciting places with an abundance of venues in which to cultivate new ties over lattes and shots of tequila.

And then there’s downtown Las Vegas, miles away from the glitzy strip. Tacky and outdated, a little bit scary, largely abandoned, you might call the Fremont Street area of Vegas the MySpace of urban America.

But just as there are those who believe MySpace can regain its former glory, so too downtown Las Vegas has its boosters. For the last two years, one of the most passionate has been Internet entrepreneur Tony Hsieh, CEO of Zappos.com, the online shoe and apparel retailer.

In December 2010, Hsieh announced that Zappos.com was planning to move its thousand-plus employees from an office park in Henderson, Nevada, to the old Las Vegas City Hall, a transition that will happen sometime later this year. When it does, Hsieh won’t be commuting. In 2011, he leased 50 units in a luxury high-rise in the neighborhood, and he and some of his Zappos.com co-workers moved in. He’s hoping more will follow—Zappos.com employees and anyone else who wants to live in a lively, community-oriented urban neighborhood near his eight-acre worksite. It’s something he calls The Downtown Project. 

Primarily bankrolled by Hsieh, The Downtown Project plans to invest $350 million in up to 200 small businesses, dozens of tech start-ups, and a diverse mix of other public resources and amenities. The ultimate goal: To create the sort of dense, walkable, mixed-used Shangri-La championed by the urban theorist Jane Jacobs in her 1961 classic The Death and Life of Great American Cities. 

Put another way, Hsieh would like to make downtown Las Vegas a more compelling social network, a feature-rich platform that encourages frequent chance encounters, fruitful knowledge exchange, and over the long term, greater innovation and productivity. Where abandoned liquor stores now fester, yoga studios shall one day bloom. 

In a town where development typically takes the form of another massive casino resort, Hsieh’s dream is a fairly radical vision. But Las Vegas has already replicated Egyptian pyramids, the Eiffel Tower, and the New York skyline, so why not thriving urban neighborhoods like San Francisco’s Mission District or Brooklyn’s Williamsburg?

Call it a venture-capital take on urban locavorism. Hsieh and his cohorts in The Downtown Project are trying to catalyze and accelerate enough hip and artsy small businesses—and maybe the next Instagram—to attract a critical mass of highly skilled residents who will further fuel the city’s economic and cultural growth.

“Instead of these traditional development efforts, where they clear an entire neighborhood and then put in a stadium or a convention center, what Tony is doing is working with the coffee shop people and the bookstore people and trying to help them expand. It’s a very market-based, very trial-and-error approach,” says urbanist Richard Florida, a professor at both the University of Toronto and New York University, whose 2002 book The Rise of the Creative Class was instrumental in shaping Hsieh’s vision of downtown Las Vegas—so much so that Hsieh sought him out for consulting advice early in the project.

Hsieh has also drawn inspiration from the Harvard economist Edward Glaeser, author of the 2011 book The Triumph of the City. But while both Florida and Glaeser have long been bullish on the benefits of urban density and the increasing value of cities in the Information Age, Hsieh himself is a somewhat unlikely advocate for urban dynamism.

In fact, Hsieh spent most of the last decade proving that serendipitous encounters with transvestite hookers or hedge fund managers on their way to the opera aren’t actually necessary for building a multi-billion-dollar e-commerce company. In early 2004, when Zappos.com was a growing but not yet spectacularly successful business, Hsieh moved its 60 or so employees from San Francisco’s most centrally located neighborhood to a cul de sac in a suburban office park in Henderson, a place so creatively barren that the arts and culture district pretty much consists of the DVD aisle at Best Buy.

The draw was low taxes, cheap office space and housing, and a large labor pool of people willing to view call center work as a career rather than a temp job. The move paid off beautifully for Hsieh and Zappos. When Amazon purchased the company for $1.2 billion in 2009, his take was reportedly $400 million.

And yet at precisely the same time Zappos left the city for the suburbs, cities started growing more desirable. While Craigslist and Match.com had offered early indicators that urban density would play an important role in how the Internet functions, social networks were making this emphatically clear by 2004. After all, what good was Yelp if there was only one vegan restaurant in your county to review? How many knitting fanatics could you aggregate at a small-town Meetup meeting? By the time Facebook, Foursquare, and Groupon came along, urban density had grown as important to high-tech performance as bit rates and processor speeds. If you don’t live in San Francisco or New York, your iPhone isn’t living up to its true potential.

This is why Google, Apple, and other tech giants now operate private corporate shuttles that ferry thousands of their San Francisco–dwelling employees to their Silicon Valley campuses each day. And why, according to The Wall Street Journal, Google’s New York City workforce has grown from around 70 in 2002 to nearly 2,800 in 2012.

But as the apps that make city living more compelling grow more innovative, cities themselves often tend toward stasis and homogeneity. Excessive codes and regulations make it hard to open small businesses. High taxes and high rents further inhibit bricks-and-mortar innovation.

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  • R C Dean||

    So company towns are the new thing?

  • Marty Feldman's Eyes||

    My thought exactly.

    But the good thing is that being in a large urban area with lots of other options, the traditional monopoly problem of the company town (which is usually in a remote location) won't be an issue. On the other hand, who knows what kind of pressure can be put on employees to live and spend in certain places. I remember reading an interview with Zappos' chief and it sounds like the company does have a certain creepy social factor to it, like they want people in the company to hang out together socially. In that context, the company town idea sounds creepy.

  • Coriolanus||

    The thing is, people treat their careers these days as extremely fluid and amorphous, and for good reason. A modern worker shouldn't expect to stay with a company their entire career(as used to be common). However, this has lead to certain companies(like Zappos) having to use other means for employee retention, such as encouraging a cohesive social unit to form out of their own workforce.

  • BakedPenguin||

    I'm surprised telecommuting hasn't become more of a thing; We have less reason than ever to have to be at a certain location. I could do my job without having to be at any specific physical location.

  • EDG reppin' LBC||

    ... It’s an attempt by people who aren’t urban planners to inject urban planning with the radical configurability that characterizes software design.

    The only urban "plan" is the spontaneous order formed by individuals and businesses as they endeavor to make a living. What top-down urban planners, i.e. Government Top Men, plan is based more on aesthetics. Worse yet, the plan is usually influenced by the latest Liberal buzzwords; green energy, renewable, bicycle friendly, light rail, live/work, etc.

    I hope this project is successful, and the capital stays private.

    Also, thank you Greg Beato for this story. Please Reason, more like this.

  • Doctor Whom||

    Government Top Men also have to spend a lot of money to undo what the previous generation of Government Top Men did, once they see the disastrous results of the previous liberal buzzwords. Remember when government planners treated the urban grid as the original sin and sought to replace it with superblocks and pedestrian malls? Their successors are busy undoing that work.

  • The Derider||

    What great urban center has been formed solely by the spontaneous efforts of individuals and businesses?

    I'm thinking London before the great fire. But not after.

  • Red Rocks Rockin||

    What great urban center has been formed solely by the spontaneous efforts of individuals and businesses?

    What great urban center hasn't been reformed due to the dysfunctions brought about by its previous configurations?

  • R C Dean||

    What great urban center hasn't been formed solely disfigured by the spontaneous efforts of individuals and businesses delusions of lackeys of the Master Class?

    From my understanding, the rebuilding of London after the Great Fire was almost entirely a non-governmental affair. There were plenty of grand plans, but they all foundered on reality.

  • Sevo||

    The Derider| 12.13.12 @ 3:31PM |#
    "What great urban center has been formed solely by the spontaneous efforts of individuals and businesses?"

    Parsed:
    'Gov't has taken over those functions, so it's obvious nothing else works'.

  • XM||

    "Urban Renewal, Corporate-Style"

    Don't you mean Ganganam Style? Oppa Gangname Style!

  • NL_||

    The great part about the downtown core of many cities is that land values have plummeted and vacancies are enormous, so it's relatively easy to snap up some properties. The problem is that the politics of many cities have not internalized the lesson that businesses and residents will flee in the face of bad governance.

    It might be easy to move loads of people into a city. It's probably harder to get the city to respect the autonomy of those people once they come in. They're more likely to treat this windfall as a resource to exploit than a gift to nurture.

  • phandaal||

    True that, but many cities are also desperate to revive their crumbling downtowns, so they keep the interference to a minimum.

    Once the people are in and casting votes for their city council is when things get interesting.

  • phandaal||

    I'm another one of those crazy people who's actually read Jacobs' "The Death and Life of Great American Cities."

    Honestly, you can look at any city or collection of buildings and see the principles she recorded in action. Very cool stuff.

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  • nikea||

    If you don’t live in San Francisco or New York, your http://www.cheapbeatsbydreonau.com/ iPhone isn’t living up to its true potential.

  • zhonga||

    This is why Google, Apple, and other tech giants now operate private corporate shuttles that ferry thousands of their San Francisco–dwelling employees to their Silicon Valley campuses each day. And why, according to The http://www.cheapbeatsbydretradeau.com/ Wall Street Journal, Google’s New York City workforce has grown from around 70 in 2002 to nearly 2,800 in 2012.

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