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Tony Hsieh: Building his Company, and His City, with Urbanism

The Zappos CEO on how collisions, community, culture are reshaping downtown Las Vegas

By Mike Singer

Internet entrepreneur Tony Hsieh, CEO of online retailer Zappos, is rejuvenating a blighted section of downtown Las Vegas with millions of his own personal fortune, growing walkable, vibrant urban neighborhoods that combine and mix diverse groups of people in the hopes of fostering innovation. As cities, infrastructure, and issues centered on community building retake center stage in contemporary culture, investing in urbanity like this has become a common approach from business and civic leaders alike. But Hsieh’s path to become an Internet mogul Jane Jacobs didn’t begin with urban planning theory or civic pleas to attract more coveted upwardly mobile “creative class” residents. It began with the success of his own company, built around the same principles of urbanism, creative collision, and diversity that he’s now spreading into Las Vegas, with the idea that Zappos customer service commitment of “delivering happiness” can travel beyond a shoe box, and into an entire community.

At age 40, the multimillionaire behind Zappos shoes is the brains and the bucks behind the disruptive, surprising vision to recreate Freemont East, a section of Las Vegas about a mile north of the city’s neon Strip, as a high-tech business/residential district. With tech start-up energy, Hsieh shared his vision of creative place-making during the closing keynote session of AIA Convention 2014, showcasing his Downtown Project.

In 2013, Hsieh moved Zappos headquarters and its nearly 1,500 employees from suburban Henderson, Nev., to a building that previously housed Las Vegas City Hall. Zappos’s relocation resulted in a $48 million building renovation, and put the company in close proximity to the Freemont East neighborhood. Meanwhile, Hsieh visited other corporate campuses (including Apple, Nike and Google) and polled his employees to glean design ideas for his new downtown campus. What was missing in these other seemingly cutting-edge 24-hour-work-and-play campuses? Urbanism.

“All those other campuses were great for their employees, but were really kind of insular and didn’t really integrate or contribute to the community around them.” Hsieh said. “We said, ‘What if instead of just focusing on ourselves, we took an approach that was more analogous to New York University’s campus, where the campus center blends in with the city and you don’t know where one begins and the other ends?’”

ROI vs. ‘ROC’

Relocating to Las Vegas’ urban core helped answer Hsieh’s search for how and where the Zappos brand would evolve. In his best-selling book Delivering Happiness, Hsieh looked at creating happiness as a business model. Zappos’ approach is to deliver high-quality and fun 365-day-a-year service in order to garner repeat customers and their attendant (and free) word-of-mouth advertising. Clothing, customer service, and company culture all collide into the “happiness in a box” paradigm that defines the Zappos brand and is spelled out in the Zappos Family Core Values.

“We decided to add a fourth ‘C’, adding ‘community’ to the first three—clothing, customer, and culture,” Hsieh told AIA convention attendees. “What makes us different from most other developers is that rather than maximizing short-term ROI, we really are focusing on the long-term ‘ROC’ [Return on Community].” As such, he has funded a variety of small businesses, from restaurants to a boutique fashion shop, as well as a community medical center and a new pre-school center. “We want to find projects that help build a community, where [the] owner is super-passionate about it,” he said.

One lens through which Hsieh looks to maximize return on community is what he calls “collisionable” hours, a measurement of how many interactions an individual will have in any given hour with others in a defined physical space. “At Zappos, we target less than 100 square feet per employee, and the reason we do that is, if you sit far away you don’t see each other as often,” said Hsieh. “How you get people to collide in the office also applies at the city level. The reason why we focus on collision is that the research has shown most innovation actually comes from something outside your industry being applied to your own. We’re trying to get people of all different backgrounds to collide.”

‘Downtown Vegas will make you smarter’

The Downtown Project, a separate company from Zappos, is focused on creating co-learning and co-working spaces that produce serendipitous encounters beyond Hsieh’s company’s walls. Of the $350 million Hsieh and a few investors have contributed, $200 million is invested in real estate, $50 million in small businesses, $50 million in education, and $50 million in tech start-ups.  Besides technology, Hsieh wants to attract fashion, music, and arts groups.

Hsieh has attracted nearly 60 start-up companies so far, some located in the world’s largest shipping container park. “Our big bet is to get all these entrepreneurs together in a small space, and statistically, the magic will just happen.”

“We’re throwing a mini-TED conference every weekend,” said Hsieh, speaking about the newly opened Inspire Theatre, located in a former 7-Eleven at Freemont Street and Las Vegas Boulevard. It offers collaboration spaces, a rooftop bar, as well as a speaker series in a 150-seat theatre. “We want to say, ‘Downtown Vegas will make you smarter.’”

“Collisionable hours per year is something that can be replicated by other communities,” said Hsieh. “This isn’t just about downtown Vegas, a place voted by many as [the] place least likely to succeed. Hopefully we will inspire other communities and cities to reinvent themselves. How many opportunities do you have in your lifetime to help shape the future of a major city?”

For the thousands of architects in Hsieh's audience, the answer to that question—coming at the end of the AIA Convention 2014 with its theme of "Design with Purpose"—is every day.

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Zappos CEO Tony Hsieh at AIA Convention 2014. All photos by MattMartin.tv.

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“What makes us different from most other developers is that rather than maximizing short-term ROI, we really are focusing on the long-term ‘ROC’ [Return on Community],” said Hsieh.

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Back to AIArchitect July 11, 2014

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