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April 23, 2014

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What’s behind Tony Hsieh’s unrelenting drive to remake downtown Las Vegas?

Tony Hsieh

Zappos CEO Tony Hsieh is seen in one of his rooms at the Ogden Friday, April 13, 2012. Launch slideshow »

Tony Hsieh bounces from table to table inside the Downtown Cocktail Room, quizzing college students.

The students, mostly from East Coast universities, are competing for the opportunity to spend two years working with start-up companies downtown, learning the ins and outs of business.

The objective of this exercise: see if the students are the right fit for the tech-friendly urban environment Hsieh is trying to create.

Someone asks a student what crime he would commit if he could get away with it.

Hsieh volunteers an answer: a “Mission: Impossible”-style heist.

When it’s his turn to quiz the students, Hsieh asks more than one: “What misperception do people have about you?”

One says people think she’s a perfectionist. Another responds that he’s often viewed as more confident than he is.

This time, Hsieh doesn’t turn the question on himself.

By now all of Las Vegas knows the 38-year-old CEO of Zappos is intensely interested and invested in downtown. He is moving his company there. He’s using a chunk of his fortune — he’s worth nearly $400 million — in an attempt to help transform the area from a decaying afterthought to an incubator for things the city longs for most — new businesses and a sense of community.

But what is the motivation behind that endeavor?

For all that’s been written about Hsieh, little is known about what drives him and his ambitions, civic and financial.

Some speculate it’s ego, a desire to remake downtown in his image — his personal Hsiehville. But others say Hsieh looks like a young Buddha, hinting that some Eastern religious ethic accounts for what can be viewed as a selfless endeavor. Still others say he can’t pass on a once-in-a-lifetime opportunity to help remake the urban center of a city known around the world.

•••

Hsieh’s interest in downtown’s progress begins with Zappos, the online shoe and clothing retailer he helped found in 1999.

In about 18 months, the company, which was purchased by Amazon for $1.2 billion in 2009, will have moved its headquarters from Henderson into the renovated City Hall building.

Hsieh has already made the move. He lives in the Ogden downtown high rise.

To understand this aspect of his interest in the area requires understanding Zappos, which is known in the business world for its quirky corporate culture that has turned the drudgery of call-center work into a career for enthusiastic employees.

A few examples: New hires are offered thousands of dollars to turn down the job offer. Cubicles are elaborately decorated. There’s no limit on the time an employee spends on a customer call. And there’s an open bar for employees who want a shot of whiskey or vodka or a beer on the job.

The effect is a collaborative and fun workplace. When someone gets a promotion, others don’t grouse about how it should have been them — they cheer.

A day in the life of Zappos.com (1-23-2009)

Fashion buyer Jennifer Sidary snaps a photograph of coworkers walking by her desk at the corporate offices of Zappos.com in Henderson. The online retailer's relaxed, fun-loving and close-knit family atmosphere has won over employees, investors and industry watchers alike. Launch slideshow »

As an outgrowth of that ethos, Hsieh wants to give his employees a downtown they can call home, not a longer commute to a decrepit neighborhood. He’s sure it will make them better employees, and better employees make better profits.

This has motivated Hsieh to put money into the ailing education system and the arts, and invest in small businesses that are the backbone of a neighborhood. He’s also working to attract high-tech start-ups.

Michael Cornthwaite, who operates the Downtown Cocktail Room and the Beat/Emergency Arts and has known Hsieh since 2007, said Hsieh’s interest in downtown is about far more than money. To him, Hsieh is a George Bailey-like figure, the decent, community-oriented character played by Jimmy Stewart in the Christmas classic “It’s a Wonderful Life.”

“The world, the way it exists now, is about power and money,” Cornthwaite said. “But he doesn’t see it that way — that ‘now that I have all this money, I’m a member of the club.’ He sees it like the club sucks and there’s a better way. He knows money doesn’t bring happiness, but it gives him the tools to bring happiness to other people.”

•••

On a morning two weeks ago, Hsieh walks from the Ogden to the Beat coffee shop. As he sips a bitter double-shot of espresso, he listens to tentative plans for a small grocery store downtown.

He then hops in the backseat of a chauffeur-driven Cadillac — he normally rides in the front, but on this day he has a guest — for a ride to Zappos’ headquarters in Henderson. His driver, Steve, an Iowa native who used to drive buses for Kid Rock, Machine Head and Etta James, is at the wheel.

Hsieh drives — he owns a Mazda 6 — but prefers to work while he travels, typing on his laptop.

At the office, he gets more coffee and walks to the Beatles room, decorated with posters and photos of the legendary band. Hsieh immediately opens his laptop. Arun Rajan, the company’s quick-to-smile chief technology officer, and Matt Burchard, senior director of marketing, enter the room. All are wearing tennis shoes, jeans and T-shirts.

Click to enlarge photo

The view from the balcony of a condo for sale at the Ogden in downtown Las Vegas on Friday, Nov. 18, 2011.

Zappos has more than $2 billion in gross sales, but its meetings feel like a gathering of the coffee-shop regulars.

The three talk, hardly lifting their eyes from their laptops. They communicate in short phrases, almost grunts of acknowledgment, interrupted by a clear directive now and then. While one person talks, the other two tap away on their computers, sending emails, sometimes to each other.

Hsieh says it’s more efficient, especially in large meetings, because people who don’t have to be involved in a conversation can get work done.

They brainstorm how to increase Zappos’ Facebook presence.

“Facebook actually posts engagement metrics now,” Hsieh says. “Zappos is now 240,000 ‘likes,’ and 4,000 are talking about Zappos.”

It’s a week before Easter and Burchard mentions that the “Happy Hunt” is coming up that weekend in Portland. The company hides 100 eggs around the city that contain Zappos products and gift cards valued between $50 and $500. Clues are distributed through the company’s Twitter account.

“Why don’t we do that in Vegas?” Hsieh asks.

The question isn’t forceful, but he waits for the answer, chin in one hand as his other hand rests on the laptop keyboard.

Burchard says it was originally scheduled for Seattle, where Amazon is based, before moving to Portland.

“I’m sure that’s something people here would be interested in,” Hsieh says.

Burchard talks about the fact that people in Portland have more discretionary income and that Zappos is already well-known in Vegas.

“We can start doing more in Vegas,” he says.

Meeting done, Hsieh walks by his desk, which is located among other desks. He picks up a few books and heads back downtown.

•••

Hsieh doesn’t tolerate boredom. He is not interested in a job that he doesn’t like, he writes in his New York Times bestseller, “Delivering Happiness.”

Outside work, he lives in a world of ideas, surrounding himself with renowned thinkers. He flies them in to spend time with him and consult and hires them to speak to Zappos employees at quarterly meetings.

At an employee meeting last year, for example, he flew in a professor to talk about his research into how speech develops in children. Another speaker talked about the necessity for clean water in poor countries, prompting employees to organize on behalf of the charity.

As a computer science nerd at Harvard, then a businessman with Zappos, Hsieh had no formal training in urban development when he announced plans to move Zappos downtown. But he has met almost daily with someone who gives him more information on the subject and offers ideas about his plans.

He’s formed teams of Zappos employees who are focusing on technology/start-ups, education, entertainment and other areas of urban life. He plans to invest $350 million over the next several years in downtown.

Now when he discusses plans, he sounds like the experts he’s been listening to and reading.

Hsieh seems willing to try out almost any idea.

“I think it has to do with the fact that he, we, have never done it before so we haven’t been told, ‘You can’t do that,’” said Zach Ware, campus/urban/startup development leader at Zappos and the Downtown Project.

On this day, Hsieh is entertaining a Stanford physician who just moved to Las Vegas to launch a downtown health care project with his wife, a radiologist. He’s also waiting for Sen. Harry Reid to arrive. It will be their first meeting. No one, not even Hsieh, is exactly sure why Reid plans to visit.

When the Senate majority leader arrives, Hsieh shows him schematics of planned remodeling of downtown buildings. After being introduced to the anesthesiologist, Reid reminisces about a hospital that used to be located downtown.

Click to enlarge photo

Dr. Zubin Damania, M.D., Tony Hsieh, and U.S. Sen. Harry Reid discuss the health system in Nevada in Hsieh's condo inside The Ogden in downtown Las Vegas.

Then the senator notices the robot. It belongs to the founders of a company called Romotive, which produces robots that can be controlled remotely using a smartphone.

The young men tell Reid that with new software, their robot could be operated using wireless Internet from any point in the world. Reid says something about potential military applications. Military robots cost as much as $10,000 or more; theirs, they say, is about $100.

Reid leaves. Within an hour is another scheduled visit with Peter Diamandis and some of his staff. Diamandis is the founder of the X-Prize, which offers millions of dollars to inventors who can solve practical problems — a vehicle that travels 100 miles on a gallon of gas, for example. He is also founder of Singularity University and just released a new book, “Abundance.”

Hsieh says that after visiting with Diamandis, he’s always left thinking, “I’m not going big enough.”

Ware tells Diamandis that the idea is to develop downtown “so it becomes the glue that holds people together: It’s a place you remember where you met so-and-so, so passions are all centered in one place. That’s a pretty cool thing.”

But it also has to have the kinetic energy to hold Hsieh’s interest. During a recent trip to a ski-resort town, Hsieh told Cornthwaite’s wife, Jennifer, that he could never live in a sleepy resort town “because there’s no sense of progress, of moving forward. ... Snow on the mountain, you ski, go to bed. But nothing’s going to change.

“So I think he really likes progress. It’s just a way of living where you want to continually evolve. And at the end of the day, there’s a sense of accomplishment.”

Later at the Downtown Cocktail Room, Hsieh, Diamandis and others drink and discuss theories about the universe, “Star Trek” and humorously devise potential future X-Prizes. After a couple of shots of Fernet, the group leaves and begins walking toward Le Thai, a few storefronts away.

At the corner of Fremont and Las Vegas Boulevard, a Metro Police officer holds up one hand. “Back up,” he orders.

A film crew is at work, and one block of Fremont Street, from Las Vegas Boulevard to Sixth Street, is off-limits to pedestrians.

Hsieh recently purchased the building he’s being prohibited from walking past. “Did anyone notify you that this was going on?” Hsieh asks Cornthwaite, who answers no.

Others say none of the businesses on Fremont were told the crew would be filming.

It’s the one-year anniversary of Insert Coin(s), whose customers can’t get to the arcade.

Suddenly, an elderly couple from Idaho stops.

Click to enlarge photo

The Fremont East district is seen Thursday, August 4, 2011.

“Are you Tony Hsieh?” the woman asks. “We toured Zappos last year!”

The police officer hears this, acts like he doesn’t, then huddles with another officer.

Soon someone from the film crew escorts Hsieh and his entourage to the restaurant.

While people close to Hsieh rarely demonstrate negative emotion, Ware is noticeably annoyed. He and other business owners have been asking the location manager to see the crew’s permit. She can’t produce one. By 9:30, police and film crew are gone and customers can again reach businesses.

(City officials later say the crew did not have a permit to film that night. The location manager sends an apologetic email saying she was under a lot of pressure.)

•••

Hsieh describes himself as shy. When he looks at ways to improve his company’s culture, he often invokes the concept of “serendipity” — architecture and design that improves the chances of happenstance meetings. He believes it increases idea-sharing, friendships and the workplace.

For the shy person who isn’t inclined to reach out to others, serendipity is a gift.

As he meets with designers from New York to lay out plans for housing downtown, Hsieh emphasizes the concept. The designers like it, but Hsieh wants them to think bolder.

“What about a bar in the elevators?” he asks.

The designers half-smile, then chuckle.

A bar in a large elevator would encourage talk among residents of a large complex in a place usually dominated by uncomfortable silence.

Hsieh is also unfailingly polite. He never takes over a conversation or a meeting if someone else has the floor.

Friends describe him as gracious, generous, kind. When a group of elderly people approaches him at a farmers market in the old bus depot downtown, Hsieh stops.

“TO-neey!” one says, grabbing his arm. He dutifully poses for a picture.

Click to enlarge photo

Tony Hsieh

He says he’s not interested in politics. What might border on the political is his refusal to give money as a one-time gift with no plan for it to be used to perpetuate a business or the public welfare. He invests in people who are passionate about an idea.

His parents drove him to succeed, he admits in his book. But at a Thanksgiving dinner last year, where dozens of friends gathered at his condo, Hsieh’s parents came off as low-key and unassuming.

“My mom still hopes I get a Ph.D,” Hsieh says.

•••

It’s First Friday, the monthly arts confab downtown. Ware hosts a party beforehand at his Ogden condo. After an hour, the group of about 40 takes Zappos buses to the event, which Hsieh and other investors purchased last year.

The buses are equipped with a bar and bartender. Drinks are free. Ware says they are looking at ways to allow the public to experience the bus ride.

The partygoers separate and disappear into the crowd. Hsieh busies himself texting an acquaintance, asking his whereabouts.

Shy but interested in interacting with others, kind but with business smarts, inquisitive, Hsieh sees using his wealth to benefit a city as more enjoyable than if he were just doing it for himself.

Why? “Definitely not” to have someone erect a statue or have a street named after him, he says.

Part of it is solving a puzzle that many have believed is impossible.

“It’s like a really big, complicated puzzle that doesn’t get boring,” he says. “Entrepreneurism is about being able to combine creativity, optimism and execution.

“It’s good for me since I live downtown, it’s good for Zappos because it’ll help us attract and retain more employees. It’s good for the city, and, ultimately, hopefully, it will help inspire other cities to revitalize themselves.”

That simple. That complex.

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  1. George Bailey hates his Savings and Loan; he's wasted his life, as far as he's concerned. I doubt Tony Hsieh shares those feelings. Most of us relate to George in this life, when we'd much rather be a Tony.

    However, if duty and honor (the qualities driving George) are responsible for Tony's commitment to downtown, or something less high-falutin, I don't care. I'm grateful for his vision. Vegas is a unique city worthy of any business' attention. Tony's efforts are very exciting.

  2. This is going to be fun to watch....

  3. People are moving into downtown. Huntridge properties are being snapped up as soon as they're on the market. And Fremont Street keeps getting business investment. Mr. Hsieh is a welcome part of the mix!

  4. Tony is awesome. I met him downtown and he was super nice and very motivated for revitalizing downtown. These people dont come along very often, enjoy it!

  5. I'd love to work for Tony!

  6. Every Major City at One Time was fortunate enough to have a Visionary. Las Vegas has one in Steve Wynn who took Gaming to another level. And Tony may very well be the next one who takes Urban Planning to another level. There is Unlimited Potential surrounding downtown to redevelop entire neighborhoods and even look at a Trolley Car Line Circle from Old to New Vegas.

    I remember Charlotte NC when it had a Crime Ridden abandoned at 5PM center city and Todays walkable Mini Manhatten with Major Museums, Gallaries, Live Entertainment Venues, NBA Arena, NFL Stadium, Indoor Aquatic Center, NASCAR Hall of Fame, Two Major Medical Centers with 2,000 Beds etc..., that it is today.

  7. what a great asset for las vegas to have...there does not seem to be a downside to his vision, if it works its good for the city, if it does not...well at least someone tried.

    the biggest challenge i see is making the area safe enough that people feel safe..you can get a block off freemont street and things change. same can be said about the strip also, but no one is pushing for people to live around the strip.

    anyway, i wish tony good luck and hope his vision and money are enough to accomplish his goals...its a win for every one...except maybe for the homeless, the mentally ill, and gangs.. i have no idea where they would go...but they are going to have to go somewhere else if this is to work.

  8. While others have talked, are talking, and continue to talk about downtown, Mr. Hsieh is doing, doing, and doing.

    'Doing' beats 'Talk' any day.

  9. Don't kid yourselves, the associates of Hsieh are making a fortune as well. This may not be a money play for him, but the other guys don't give a crap about downtown, they're out to make money while hiding behind him.

  10. @geenab65 - what happened with the bank crisis a few years ago was legal....do you care about that? Charging high interest rates to ignorant people who don't understand loans and money management is legal, ok with that? Your pockets must be getting stuffed too to have that kind of a response.

  11. While I applaud Mr. Hsieh's efforts to revitalize downtown, there is much in what I read in this article that troubles me. Perhaps it comes down to understanding that one man's vision of utopia is not necessarily shared by all men.

    Quite a few years back now a man named Peter Blake wrote a book called Form Follows Fiasco. In it he examined the basic tenets of the International Style, a style of architectural design. The International Style also believed that good design must "start from zero", tossing out the lessons learned over millenia about what constitutes good design, and it also held that design could bring about social change. In short, a bum put in good housing would change and no longer be a bum.

    The failure of both those tenets is evident in the almost unliveable, empty, sterile spaces of International Style buildings, and in the razing of public housing that was intended to not only improve the living conditions but the lives of the tenants.

    Tony Hsieh's plans for downtown - at least as described in this article - seem entirely focused on the needs of his employees and his business. Fair enough, but while his business values diversity of thought and creativity (see the Values Frog on the Zappos site), the application appears to be one of selecting the same type of employee over and over. Nice, sharp 20 somethings that value coffeeshops, bars, and art fairs, happy to live in an apartment, focused on work all the time, and willing to toss out their ethics if the price is right.

    It's interesting that Tony found life in a ski town boring. I had the opportunity to live in Jackson Hole for a couple of years, and one of the things I learned is that the community didn't value ski bums. All ski bums did was ski, and hang around until it was time to ski some more - but they added very little to the overall community.

    The City of Las Vegas needs downtown revitalization, but it also needs involved citizens. Hsieh-bums living in Hsiehville, wandering from coffeeshop to bar to art fair may not provide that - or maybe they will in time.

    Mr. Hsieh may also come to regret locating his business in a highrise office. So much stress is laid on serendipitous meetings, where conversation can lead to innovation at Zappos, yet high rise office is the least friendly environment for creating that sort of interaction. A bar in an elevator may be one way of overcoming that - and it can be done, provided you can convince the Fire Marshal of that kind of use. (Think of a 20 foot long freight elevator, the kind you can drive an SUV into. It also moves slow enough where you might be able to get your drink before you reach your floor).

    I wish Mr. Hsieh and his partners every success. They might also want to go look at Old Town Pasadena for some insights. At one time is was an old, disreputable part of town that saw no life after dark. Now it's a vibrant part of the city that attracts visitors from all over the LA area.

  12. @JudgeRoyBean - You make some very key points that I agree with. Specifically the comment:

    "Tony Hsieh's plans for downtown - at least as described in this article - seem entirely focused on the needs of his employees and his business"

    That's exactly what's wrong with the downtown development. Everything he's doing is catered toward HIS idea of utopia. Your other comment:

    "Nice, sharp 20 somethings that value coffeeshops, bars, and art fairs, happy to live in an apartment, focused on work all the time, and willing to toss out their ethics if the price is right."

    ...is very true. It's the same crowd at the First Friday burning man freak show and now they're making plans to take over and destroy an old, historical part of Vegas. They don't care about anyone but themselves and if you don't fit in, they push you away...

    Great way of articulating the issues!

  13. Las Vegas is very lucky to have Tony Hsieh as its promoter and benefactor! I have toured Zappos headquarters in Henderson, can't wait for them to move Downtown; I want to be the first group to tour! I wish I was part of a team like Zappos, a model for all businesses. That's why so many tour and more CEO's should visit to see what a real team environment looks like.

    And what Tony is doing for Dowtown Vegas is a model for all urban cities to copy as well. Instead of complaining why their Downtown is broken, they need to learn from Tony and form partnerships to bring new entrepreneurs to revitalize these city centers. Fix the center and the rest will follow!

    Good luck Tony Hsieh. One day I hope to meet you and shake your hand!