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 Tacky and outdated, a little bit scary, largely abandoned, you might call the Fremont Street area of Vegas the MySpace of urban America.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.

In recent years, entrepreneurs have tried to route around such obstacles in novel ways. Food trucks give aspiring chefs more flexibility than a traditional restaurant. Pop-up boutiques allow entrepreneurs to rapidly prototype and debug new retail concepts. The Downtown Project has similar aims: It's an attempt by people who aren't urban planners to inject urban planning with the radical configurability that characterizes software design.

Witness Hsieh's plans for Central Container Park, an outdoor mall whose buildings will be fashioned from shipping containers and thus allow entrepreneurs to test ideas before investing in costly build-outs and long-term leases. Or his notion of creating a dorm-like building that offers 100-square foot studios (with shared bathrooms) for as little as $100 a month. 

Already, Hsieh is discovering that building a real-life metropolis is more complicated than playing Sim City. "I come from a tech background and I'm used to being able to go from idea to launch in 24 hours," Hsieh recently told Pando Daily editor Sarah Lacy in a video interview. "And you just can't do that with city regulations and permits and so on."

But according to The New York Times, the Downtown Project has persuaded "around 15 tech start-ups" to set up shop in Las Vegas and initiated at least 16 construction projects. It's purchased multiple properties and jump-started a new restaurant and a co-working facility. Along with the shipping container park, a pre-school, a newsstand, another co-working facility, and a venue for TED-like public talks are also in the works.

 "As someone who works in this field, I'm shocked at how fast he's been able to organize and move," says Florida. "It shows what entrepreneurs can do versus what governments can do."

And perhaps it also points a way toward a more dynamic future, where urban planning is defined at least as much by new ideas and experimentation as it is by zoning codes and preservation groups. As flexibility, novelty, and rapid change increasingly characterize our lives, we want more and more of these things, from our neighborhoods as well as our smartphones.