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Two Steps Forward

Tony Hsieh and the power of human ecosystems

<p>Creating platforms and networks for people to convene, innovate, and thrive doesn&#39;t take a tech revolution. More like a culture revolution.</p>

Tony Hsieh will be a featured keynote speaker at VERGE SF. Click here for more information.

I began my recent conversation with Tony Hsieh, CEO of Zappos, by asking him how he's leveraging the technology convergence we call VERGE to fulfill his ambitious goal of revitalizing downtown Las Vegas.

"I guess I haven’t really thought of that," he responded.

It turned out to be the wrong way to start an interview with Hsieh. Leveraging technology, it seems, is the least of what makes his plans noteworthy.

Hsieh is in the midst of moving his shoe and apparel retailer — which he still runs, despite having sold the company to Amazon in 2009 for $1.2 billion — from its suburban headquarters, in Henderson, Nevada, to a location about 15 miles northwest: the old City Hall in downtown Las Vegas, one of the most depressed cities in America.

It’s a bold move, literally and figuratively, but in some ways the relocation is the smallest part of it. Hsieh and some partners — outside of Amazon — are investing $350 million in what they have modestly called Downtown Project, with the goal of transforming Las Vegas “into the most community-focused large city in the world." The strategy: "inspiring and empowering people to follow their passions to create a vibrant, connected urban core.”

Please understand: The Las Vegas they’re talking about isn’t the glitzy Strip, the home of casinos, clubs, and over-the-top entertainment. Downtown Las Vegas, just north of the Strip, is the central business district. It reflects the gritty reality of Vegas, and of Nevada overall: There have been more foreclosures in Las Vegas than anywhere else in the United States; Nevada's unemployment rate is the highest in the nation.

Enter Hsieh and friends, who are investing $100 million in real estate, $100 million in residential development, $50 million in small businesses, $50 million in education, and another $50 million in tech startups through something called the VegasTech Fund.

We invited Hsieh to speak at our upcoming VERGE SF conference because his theme mirrors some of ours: the city as startup; the key role of platforms — technology and otherwise — in fostering a culture of innovation; and ecosystems of nontraditional partnerships and allies that lead to radical efficiency, systems thinking, and innovative solutions.

So, Hsieh and I quickly determined that the whole project isn’t that innovative, technology-wise. Indeed, he says, “It’s probably the lowest-tech thing that we’re doing. We’re just trying to get like-minded people together in a room and basically helping create the spaces for those people to share ideas.”

Sharing ideas, technologically or not, is at the heart of what Hsieh envisions for his downtown creation, both for his company, his employees, and all who interact with both. “We thought rather than just invest in ourselves, let’s invest in the community and invest in the surrounding ecosystem,” he said. “And in the long run, that’s actually going to help us attract and retain more employees.”

Hsieh’s goal is to have “everything you need to live, work and play within walking distance. And making it the co-working and co-learning capital of the world. So part of the investment is to invest in small businesses that help build a sense of neighborhood and community so things like cafes and coffee shops and bars and restaurants and so on."

Another part of the project is to invest in tech startup companies unrelated to Zappos, "and also invest in cultural stuff, art stuff, education, and so on," as Hsieh puts it. "And so I consider all those things to be part of the ecosystem, because you need all of those things to attract the employees of tech companies to want to move here, and those are the types of employees that are also beneficial to Zappos.”

Hsieh cites the work of Harvard economics professor Edward Glaeser, whose book, Triumph of the City, declares that cities are the healthiest, greenest, and richest (in both cultural and economic terms) places to live. Hsieh cites research showing that “every time the size of a city doubles, productivity or innovation per resident increases by 15 percent, whereas when companies get bigger, productivity per employee goes down. So, part of our goal is to avoid that fate and kind of create this virtuous cycle between corporation and community and city so that we’re all benefitting from kind of a rising tide.”

Hsieh described the “three C’s” of his Vegas vision:

  • Collisions — “those random conversations when you run into someone at a bar or whatever, and it’s not someone that you necessarily talk to in your industry every day. And it just spawns new ideas or insights or patterns that they’ve discovered work in other industries.” He used Zappos current headquarters in Henderson, as an example. “In the building I’m in right now, there are doors all around the entire building. The previous tenant left all the doors unlocked so that employees can exit in and out of any side of the building. We decided to lock all the doors and force all of the employees through the front door in order to maximize the number of collisions among employees. The same type of thinking occurs at the city level when we think about how do we get people out on the streets.”
  • Co-learning — “the long-term vision is we want learning from external sources, but we also want the community to be teaching itself, and making itself smarter. And so, for example, we’re planning on investing in 100 to 200 small businesses that help build a sense of neighborhood and community. Maybe the florist is really good at marketing and the person who runs the coffee shop is really good at interviewing. So, ideally it’s something that they would all share with each other, within the community, and instead of everyone just being an island.”
  • Community — “the serendipitous encounters that you see from what’s happening right now in the Fremont East area [of downtown Vegas]. If you go to lunch or drinks or whatever for an hour, it’s normal to run into ten different people that you know. And that definitely helps that ongoing sense of serendipity and familiarity. It definitely helps in contributing to that sense of community. I guess it’s a widely overused word, so I try not to use it as often, but I guess we’re thinking of it more as the analogous thing to a company culture, but but just at a city level, so basically culture is to company as community is to city. And there’s lots of places that claim to have community, but don’t really.”

It’s an audacious idea: to transform not just a city, but a culture. Hsieh’s Las Vegas certainly isn’t the first planned city — there are dozens, from Reston, Virginia, to Foster City, California, in the United States, and from New Songo City, Korea, to Masdar, UAE — though this seems one of the first to have an entire cultural philosophy baked in.

But that’s not all that’s different here. Hsieh sees Las Vegas as a platform for start-ups and innovation, not just a series of well-tailored neighborhoods. And it’s that part of the project where he best syncs with VERGE, where the new ecosystems of players he envisions can create innovative solutions that address environmental and social challenges. That includes reurbanization — making cities vibrant, resilient, and hyperefficient environments in which to live, work, shop and play.

I asked Hsieh how much of what he and his partners in Las Vegas are doing is replicable in other cities. He was elusive — he’s focusing like a laser on this one-city experiment for now, not necessarily fostering meglomanic ambitions to create carbon copies across the land. But he clearly sees that what happens in Vegas doesn’t necessarily have to stay there.

“I think five years from now people will turn around and ask what just happened in downtown Vegas,” he says. “It’s a complete 180° from where it was five years prior. And for downtown Vegas to become the most community-focused large city in the world and to have it be a place of inspiration and learning and community and happiness and productivity and innovation. Hopefully that will start the domino effect for other cities. Because if we can do it in downtown Las Vegas, then other cities don’t really have any excuses.”

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