Though best known as the chief executive officer of fast-growing online shoe and clothing business Zappos, Tony Hsieh is also leading one of the largest urban regeneration projects in the United States. In his keynote address at the ULI Spring Meeting in Detroit, Hsieh detailed his strategy to redevelop a run-down section of downtown Las Vegas around the Zappos headquarters, providing a blueprint for revitalizing neighborhoods.
Many cities try to build around sports teams or universities, “but not every city can afford those things,” he said. “We wanted something that could be replicated by other cities looking to reinvent themselves.”
The goal is to develop a community-focused, live/work/play environment that would be the co-learning and coworking capital of the world, he said. Instead of maximizing short-term return on investment, Hsieh and his partners focus on “return on community” and “return on collisions,” the random meetings and connections that develop a sense of community.
The group invested $350 million in the Downtown Project, which is a separate entity from Zappos. The small group, which includes former Zappos employees, purposely did not take on investors or debt, he said. “We really wanted to take a long-term approach,” Hsieh said.
The group formulated a specific budget for the $350 million investment, he said. A total of $50 million was set aside to promote small business, specifically businesses that were owner operated, promoted community collisions, and were “story-worthy.”
The group created Downtown Container Park, an open-air shopping center that uses old shipping containers and includes a flame-spouting praying mantis sculpture salvaged from the Burning Man festival. Leases for retail space in the park are as short as three months, giving entrepreneurs the opportunity to try out new concepts.
“If [the retail concept] works, we may invest in a larger location,” Hsieh said.
Another $50 million was targeted to attract technology startups, and $50 million is focused on developing education, arts, and culture in the neighborhoods. Large-scale art was brought in and placed in locations around the area in an effort to “get people to walk one more block,” he said. The company also produces Life Is Beautiful, a three-day music and culture festival.
The rest of the investment—$200 million—is focused on real estate and developing 45 acres (18.2 ha) around the Fremont East and East Village districts, including about 11 businesses owned and operated by the enterprise. Hsieh and his colleagues are attempting to engineer a diverse, vibrant community.
Hsieh recommended that audience members read a book by Edward Glaeser, ULI trustee and Manhattan Institute fellow, titled Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. The book “guides a lot of thinking in our philosophies,” he said.
The group initially developed a three-pronged formula for developing serendipity in the neighborhoods, Hsieh said. The first part of the formula was developing at a density of 100 residents per acre (250 per ha) and providing street-level opportunities for residents to collide and a culture of openness and sharing.
But the formula soon changed when it was realized that residents do not always contribute to connections in the neighborhood. The idea of 100 residents per acre was arbitrary and was only achievable by building residential towers or by convincing people to live in small spaces.
Instead, the group has decided to focus on achieving “1,000 collisionable community hours per acre per year,” creating a metric that includes the advantage of attracting visitors to the neighborhoods.
The slogan for the area is “Downtown Vegas makes you smarter”—a connection that nobody used to make the area, he said.
“If we can do this in downtown Vegas, maybe we can help inspire other communities to reinvent themselves,” Hsieh said.
Hsieh, who wrote the bestseller Delivering Happiness chronicling his life as an entrepreneur, also provided insight into his real estate strategy at Zappos. The company was based in several buildings in Henderson, the Las Vegas suburb, before purchasing the former Las Vegas City Hall in 2012. Getting all the employees under one roof was a priority, as was the availability of land to allow the company to easily expand, Hsieh said.
Zappos toured Apple, Google, Nike, and other corporate headquarters and found them “really insular” and isolated from the communities. He decided he wanted to design the new headquarters to encourage employees to go out to the community and be part of the neighborhoods.
Zappos is built around culture, company service, and clothing, but management added “community” after moving downtown. When Zappos employees were asked what they would like to see in the new headquarters, the top answer was doggy daycare, Hsieh said.
Hsieh—who sold his first company, LinkExchange, to Microsoft for $265 million in 1998 when he was 24—lives his philosophies. For years he has made his home in a 240-square-foot (22 sq m) Airstream trailer in a trailer park downtown.
In his keynote, Hsieh repeated one of his favorite mantras, which also touches on his philosophy: “A great brand is a story that never stops unfolding.”