Tony Hsieh's Excellent Las Vegas Adventure
In which our hero, flush with $400 million from the sale of his company, attempts to reinvent his city, Zappos-style.
Marc Burckhardt
Getty
Birth of a City: Hsieh plans to turn downtown Las Vegas into something resembling Austin. The first step happens in 2013, when Zappos takes over the former city hall. Hsieh won over Las Vages's city council thanks to help from local bigwigs, like former mayor Oscar Goodman.
"You can't tell anybody about this." Tony Hsieh takes a shot of vodka, and then he tells me a secret, eyes wide, voice rising.
He wears, as he almost always does, a navy T-shirt that bears the logo of Zappos.com, the online shoe retailer he helped start in 1999, that he has run as CEO since 2000, and that he sold to Amazon.com for $1.2 billion in 2009. At this moment, Hsieh—whose name is pronounced Shay and whose default expression, if you can call it an expression, is an impassive stare into the middle distance—also wears a slight, conspiratorial smile. "We're thinking about taking over city hall," he says.
We're at Hsieh's favorite bar, the Downtown Cocktail Room, two blocks south of the building in question. Although the bar is part of a small, up-and-coming neighborhood in the city of Las Vegas, it is very much a diamond in the rough. Downtown Las Vegas is just 2 miles north of the Strip—the glittering, Wall Street–backed tourist attraction in unincorporated Clark County—but it often feels much farther away. This is a hardscrabble place, populated largely by the area's working poor, not to mention its pawnbrokers and bail bondsmen. It is also, as far as Hsieh is concerned, an enormous opportunity.
Hsieh doesn't tell me everything during this particular conversation, which takes place in the spring of 2010. He doesn't know everything yet. But he can already see a plan for the city forming in his mind. He sees barren streets blooming to life, lush with the revelries of thousands of creative young people. He sees new bars and nightclubs, hosting bands that college towns such as Austin and Athens, Georgia, would wish they had. He sees art galleries and yoga studios and bookstores and charter schools and zip lines. He sees the next great American city, sprouting up, miraculously, in the most blighted part of the most blighted city of the most blighted state in the country.
Anyone who has spent any time with Hsieh knows that he is prone to wild thought experiments and is especially susceptible to huge and unreasonable ideas. "One of the best things about Tony," says Michael Cornthwaite, a Las Vegas restaurateur and a friend, "is that he doesn't live by or within the same limitations that you're used to dealing with. He has never—maybe never in his whole life—thought within the same constraints as the rest of us." This means that a lot of what comes out of Hsieh's mouth must be interpreted impressionistically: If he says that he's building a movement to make the world a happier place, you understand that to mean that his online retailer has loftier goals than selling shoes. If he says that one day, there might be a Zappos airline, he means that his company could expand to other businesses—apparel, say, or housewares.
But every so often, these visions remarkably turn out to be true in a literal sense. A few months after our interview, Hsieh sent me an e-mail confirming the plan to move to city hall. The subject line of Hsieh's e-mail included a smiley-face emoticon—Hsieh loves emoticons—and the following subject: Playing SimCity in Real Life.
I returned to Las Vegas at the end of last summer to find out how much progress Hsieh had made. He immediately offered to show me Zappos's future digs, which are still occupied by the Las Vegas city government. "Let's see if the mayor is here," he says, studying his phone as we walk down a sun-baked Stewart Avenue in the heart of downtown.
For the past year or so, Hsieh has spent countless hours thinking about how to fix this place. He and a staff of half a dozen people who work for his latest company, the Downtown Project, have been corralling local business owners, drafting development plans, and giving tours to entrepreneurs to try to persuade them to relocate to Sin City. He spends about half of his workweek devoted to his other job, trying to figure out how to sell more shoes and apparel at Zappos, which now has more than $1 billion in sales and 3,500 employees.
Downtown Las Vegas has two major industries: government and gaming. The past few years have been unkind to the former, as both the city and county governments have been subjected to annual double-digit budget cuts and layoffs numbering in the hundreds. The old casinos that line Fremont Street—Binion's, the Four Queens, the El Cortez, the Golden Nugget—have fared slightly better, but only by marketing themselves to a crowd that might euphemistically be described as "value conscious." There are more vacant lots around the planned Zappos headquarters than occupied ones. There isn't a gym, a grocery store, or a dry cleaner within walking distance.
On this particular afternoon, Stewart Avenue, like most of downtown Las Vegas, is deserted save for the panhandlers. Despite the fact that it's a weekday afternoon, city hall is empty, too—the result of a government-mandated four-day workweek to help close the budget gap. The Las Vegas metropolitan area has an unemployment rate of 13.1 percent, the highest among the larger cities in the state of Nevada, which itself has the highest unemployment rate in the nation. Housing prices in Las Vegas have fallen 60 percent since 2007, and 1 out of 9 homes is reportedly in foreclosure.
Hsieh intends to change that. In addition to the plan to move Zappos downtown, he has made a series of investments from his sizable personal fortune: seed capital for several tech start-ups that have promised to relocate; $2 million for a new performing-arts center that will bring Broadway shows downtown; $1.2 million to Teach for America to improve downtown's schools; $7 million for 20 percent of the charter airline JetSuite, which he plans to use to fly prominent entrepreneurs and rock bands into town. Hsieh was also prepared to spend $2 million to build, of all things, a zip line to fly tourists down five blocks of Fremont Street—though that project appears to have fallen through.
Hsieh has lots of other ideas, too—displayed as 108 multicolored Post-it notes, assembled in columns, on his living-room wall, with words like Farmers Market, Breakfast Place, Community Kitchen, and Pool scrawled on them. The most pressing matter is the construction of hundreds of units of affordable housing. "We want to have 1,000 new people living within three blocks from here," he says. "The goal is to create a walking city."
Hsieh himself left a McMansion in a gated suburban community (Zappos itself is in the suburb of Henderson) for an apartment two blocks from his future corporate headquarters. Most of Zappos's executives have rented apartments on the same floor; a dozen other Zappos employees have also moved into the building, in which a two-bedroom apartment rents for about $1,600 a month.
If everything goes according to plan, Zappos will take over the old city hall—a slightly loopy paean to 1960s Modernism with a circular courtyard and an 11-story tower that for some reason has no windows on one side—at the end of 2013. That will make Zappos one of the largest private employers in Las Vegas proper. (A new city hall will be located three blocks south, as part of a roughly $500 million redevelopment effort that includes a museum dedicated to the history of the Las Vegas Mafia and a proposed arena for a professional basketball team.) "Zappos gives us a critical mass," says Oscar Goodman, the brash former Las Vegas mayor, known for having brokered the deal that brought Zappos downtown and for his tendency to appear in public only when flanked by showgirls in full bustier-and-feather regalia. He now serves as an executive at the Las Vegas Convention and Visitors Authority. "These are people who will need a grocery store, a bookstore, a music store," says Goodman. "It's a perfect fit."
