The World's First Startup City: The Downtown Project | Zappos CEO Tony Hsieh

So, completely separate from Zappos, we formed a separate company called Downtown Project. So, Zappos is wholly owned by Amazon. Downtown Project is just a separate company that myself, Fred, who's sitting in the back, and a handful of other people just invested in individually. And the reason why we didn't take on any outside investors is so that we could take a really long-term approach. And really just do what we think is right for the community. It has a $350 million budget, and I'll give a quick breakdown into how each of the different areas are being allocated. So it has a few different goals. One is to help create a place where you have everything you need to live, work, and play within walking distance, and to get people to actually get rid of their cars. Another is to make downtown Vegas the most community-focused large city in the world, and probably the place people would least expect it. And third is to make it the co-learning and co-working capital of the world. And for co-working, it's not just tech companies working together, but also— because now actually there's literally thousands and thousands of co-working spaces all around the world, but not just in tech, which is where it started, but also in fashion and culinary and 3D printing. And you can imagine building a co-working space around anything that you can build community around. So our focus is, rather than kind of— a lot of real estate redevelopment projects are focused on these short-term cash flow needs or ROI needs, and rather than focusing on the short-term ROI, we have this approach of actually, we really should view it through the filter of maximizing the long-term ROC, return on community. And this is kind of analogous to how we hire at Zappos. So at Zappos, we do those 2 sets of interviews. And the HR department does a separate set of interviews just for culture fit. For all of our investments, not only does it have to be a good investment, but it needs to help build community. And not only does the investment itself need to help build community, but the entrepreneurs actually need to care about community more than beyond just their specific business. And, and, and so we look at that. And then there's this other term, ROL, which we stole from Jim Collins's latest book. Great by Choice, Return on Luck, Accelerating Serendipity. And this whole idea of actually being able to increase your luck sounds a little strange, but it's actually something that we spend a lot of time thinking about and strategizing about. So the big bet is by focusing on these 3 C's— collisions, community, and co-learning— that not only is that going to lead to a happier and luckier community, but actually innovation And productivity increases, and I'll get into that in a little bit. So, quick breakdown of the budget. $50 million is to be invested into small businesses to help build a sense of neighborhood and community, and the idea is invest in 100 to 200 small businesses. This is actually the Post-it— this is my apartment, and there's a— we actually have a separate downtown project tour that goes through my apartment every day, and when people go through, we just ask them, what do you want in your dream neighborhood? And people will— if it's not already up there, we encourage people to write something down on a Post-it note and put it up on a wall. But the other cool thing that happens is every once in a while, we get someone whose lifelong dream is to retire, say, 10 years from now, and start a cupcake bakery. And we just tell them, well, rather than wait 10 years, we'll invest in you now. Why don't you start living out your passion, living out your dream? And we have a few different criteria. One is we want them to be owner-operated. It needs to be something they're super passionate about. Needs to help build community. Need confidence in their ability to execute. Unique first or best is really important. We don't want to just open up some a chain or something that's in seven other cities, and and story worthy is important. So this is Natalie, and she had been working at as a chef in a casino for ten years, and actually quit her job. Was sick of working in the casino environment, and actually about a head. I went home to— back to Santa Fe, and I randomly ran into her in a coffee shop locally, and it turns out her lifelong dream was to open up her own breakfast and lunch place. So we started talking, and she met some other folks from our team, and this was actually one of the first small businesses that we decided to fund. And so you can see her area under construction. Oh, by the way, I'm not a PowerPoint person at all. But I'm very proud of this transition, so we're going to look at that one more time. And then you can see it under construction. And she actually opened up about 9 months ago and is doing almost triple her original projections. And not only that, but this has become this new daytime community hub where if you just go in there for a meal, you'll probably run into 5 or 10 people that you know. This is a check— this was still a check cashing place a year ago. This is what it looked like before. This is Sarah, and her lifelong dream was to open up her own boutique clothing store. So we funded that as well, and she describes it as a hangout place that happens to sell clothing, and people in the community actually stop by several times a day just to see who else is in there, and she set up coworking space in the back and so on. We're set to open in October or November this year. A park that's built out of shipping containers. And this is actually Earn, who used to be a Zappos employee and left several years ago because his passion was to open up his own barbecue place. And so he was selling barbecue meat and sauce at the local farmers market and doing catering and so on. And then when he found out about this project in this shipping container park that we're opening, he got really excited about that. And in the background there, is actually them lowering the shipping container that's going to be his future restaurant inside the park. And these are just some renderings. There's actually going to be a 40-foot praying mantis from Burning Man that shoots out 12-foot flames in front. And actually, we want to add a lot of large-scale art and fire elements to downtown, because there's no city that actually owns the concept of fire, and so I think there's an opportunity for us to do that. And the idea is just get— And if we keep spreading those out and put it out every block or 2, you can just get people to walk that extra block and then keep walking around the neighborhood. It's kind of hard to see, but up here is going to be an outdoor live music stage. And in the middle there is actually going to be a kids-focused area. We're building a 24-foot-tall Swiss Family Robinson treehouse type of thing, and there's these giant Legos. The idea is to have these activities for kids to enjoy while the parents are enjoying their wine and cheese and watching the live band. And then the kids can actually have a passport and go through different— the different retailers that are there. For example, they can go to the local flower shop and learn how to arrange flowers or learn something about flowers. So there's a combination of having these activities and education elements to it. We're working on— bike sharing and car sharing as well. We actually announced a couple months ago we placed the largest US order of Teslas. We ordered 100 Teslas, and the idea is let's just make sure that there's so many car sharing and bike sharing options that it's easy for people to get rid of their cars. On the tech side, we have $50 million set aside to invest in tech companies, and this has actually been the fastest growing part of everything that we've been doing, and it's been kind of a surprise because 2 or 3 years ago, there was no tech scene in Las Vegas. And then we funded a tech library to be built out, and then these companies started showing up. And it turns out every company thought they were the only tech company in Vegas, when there were actually quite a few. They just never had a place to meet up. And now since then, through the Vegas Tech Fund, we've in the past year actually relocated, I think, around 30 tech companies from other states or even countries to downtown Vegas. And they come for a couple reasons. One is for this whole sense of community, and the other reason is really just this whole idea of thinking of the city as a startup. And how many opportunities in a lifetime do you have to help shape the future of a major city? Partnering with Venture for America, which is like Teach for America but for college graduates that want to become entrepreneurs, and partnering with Teach for America, they're actually relocating their Vegas headquarters to downtown. We're opening up an early childhood center next month that's going to be focused on teaching kids entrepreneurship and creativity using the latest neuroscience research. We took over an arts and musical festival called First Friday. First Friday of every month draws 20,000 to 25,000 people, and actually had the first urban burn downtown as well. This is another example of large-scale art from Burning Man. This is going to be on a 10-foot pedestal, and that's already 45 feet tall, and you can actually crawl up in there and put a DJ on top, which I think will be pretty cool, and then, and just having all these large-scale art elements spread around downtown Vegas. There's actually a live picture of the praying mantis shooting out some fire. Oh, Life is Beautiful is this exciting festival that I think there's a video I can show you guys later. Where we're fencing off 15 city blocks, which has never been done before in any city, and bringing 70 bands and I think 40 celebrity chefs. It's an arts festival, it's a culinary festival. There will also be lots of great speakers, so it's a learning festival, and there'll be arts as well. And there's capacity for up to 100,000 people. So think of it as almost like South by Southwest meets Coachella inside of a city. And this is a great book we recommend, Triumph of the City, written by a Harvard economics professor that studied cities from all different time periods, Rome, New York, Detroit, and looked at why some thrived and some didn't. And he was actually, a lot of what we're doing is actually guided by this. And some of the stuff that he talks about is actually really counterintuitive and also really interesting. For example, every time the size of a city doubles, productivity or innovation per resident increases by 15%. But when companies get bigger, productivity per employee generally goes down. So from Zappos' perspective, part of our goal is to avoid that fate. Instead, we hope that by focusing on the ecosystem and making Zappos an integral part of this ecosystem, that it's going to create this positive feedback loop so that Zappos can actually get more productive and innovative as well. And the ingredients for that to happen are a residential density of 100 residents per acre combined with street-level activities, so all those Post-it notes you saw for the residents to collide in. And then the third one is probably the hardest but also the cheapest and the one that gives you the most leverage, this culture of openness, collaboration, and sharing. So if people are twice as likely to talk to each other and help each other out, Then maybe you only need half that residential density.