Five years in, Tony Hsieh’s Downtown Project is hardly any closer to being a real city

Many of Zappos CEO Tony Hsieh’s followers launched their companies in Container Park, a small business incubator.
Many of Zappos CEO Tony Hsieh’s followers launched their companies in Container Park, a small business incubator.
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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.

DTP is now being run more like a traditional urban planning project, with a focus on real estate and paring down its investments to focus on money-making operations. In Las Vegas, that means bars. When asked by journalist Kara Swisher in May 2016 whether he considered Downtown Project a success, Hsieh replied, “It’s a work in progress—like any startup.”

It turns out, applying the same principles used to grow a startup into a 1,500 person company don’t translate perfectly into the walls of a city. At Zappos, Hsieh can control its environment through hiring and firing. He’s known to be a non-confrontational leader who surrounds himself with yes-men and -women. But great American cities thrive on their capacity for dissent and diversity, which beget a wide range of ideas. Real estate developers tend to follow artists (a theory that is debated, but the influence of artists on the rise of great cities is irrefutable). It’s part of why investors are now drawn to Detroit, which is on the verge of a renaissance, as they were drawn to New York a century ago. Artists give cities a feeling of aliveness. “Software developers move to be around artists,” said Ron Corso, owner of Downtown Project-funded 11th Street Records. “But artists don’t move to be around software developers.”

While Downtown Project certainly has notable successes—like Natalie Young’s Eat, and the late Kerry Simon’s Carson Kitchen—they stand out as outliers amidst the 50-some small businesses created and 100 or so tech companies invested in since 2011.

For a two-time successful Silicon Valley entrepreneur, this is Hsieh’s first real failure. Downtown Project improved the area but it did not deliver on the grandiosity of his core promise. He has not conceded much publicly, except for the fact that his one regret was not focusing on affordable housing early on. In early 2016, he told Quartz that there was a chance he had invested $500 million so far (his investment is a function of Amazon stock and he took out money as needed). Since the 2014 layoffs, Downtown Project has continued to scale back its staff. Its head of operations, Michael Downs, explained last summer that 2018 was the new goal for Downtown Project to reach sustainability. But other than those two data points, Hsieh and his deputies have kept quiet on what the future holds for Downtown Project.

So what happens next? Increasing the Downtown Project’s chances of success in 10 or 20 years will require allowing for more messiness and diversity of thought so that the very best ideas can truly come forward—and so that authentic community can build itself.