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The Creative Class Boondoggle in Downtown Las Vegas

On Tony Hsieh and the pseudoscience of "collisions."
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Las Vegas. (Photo: Wikimedia Commons)

Las Vegas. (Photo: Wikimedia Commons)

I'll say it again. The lust for greater density is pornographic. I've been a vocal critic of Tony Hsieh's Downtown Las Vegas project, and recent news of Hsieh walking away from the revitalization experiment portends an implosion of "Creative Class" urbanism. Does density drive innovation? Both Hsieh and Richard Florida think so. But only Hsieh takes the theory to its logical (and hilarious) extreme:

Tony Hsieh — the enigmatic, shy yet hard-partying 40-year-old founder of Vegas-based shoe-sales site Zappos, which he sold to Amazon for $1.2 billion — could have a lot of toys. He chose a city.

Since buying 60 acres and promising a $350 million investment in 2012, Hsieh has turned the downtrodden, recession-hit heart of Las Vegas, the 109-year-old town that is 10 minutes off the more-famous Strip, into an experimental startup city, where residents — from the schoolteachers to the startup founders — are venture-funded entrepreneurs.

In a mix of franchising and entrepreneurship, Hsieh’s Downtown Project has 300 projects going on simultaneously, from new restaurants to tech startups to social science experiments — his small business founders make a salary and then 50 percent of the profit after paying their loans back to him. He said his inspiration was, in part, the immersive computer game Second Life. ...

... There’s a whimsy but also a danger to the charismatic-leader-driven development that could fall anywhere between Google-ish playfulness to Howard Hughesian eccentricity — Hsieh bought the swath of land in the shape of a llama — at first accidentally, and then intentionally, because, hey, he likes llamas. But there’s been trouble. There’s been disappointment. And there have even been suicides.

There are more than a dozen new bars in this new city within the old city, but not yet the long-awaited grocery store. Many of the new companies follow a business philosophy created by software developers called “Holacracy.” Importing tech and cocktails into Vegas, Hsieh is hoping to turn this startup city into a social-science petri dish, and has funded people to track residents and study “the ROI on collisions,” or the financial benefit of bumping into one another. If the project works out, he says, he’ll expand to other cities, like Detroit.

The above is the first installment of as series from Nellie Bowles about Hsieh's "innovation city" experiment. Collisions (i.e. chance encounters) between creative people serve as the active reagent for great feats of entrepreneurial activity. Pack a bunch of smart people into urban space and genius is bound to happen. That's Holacrazy.

As I'm writing this post, Tony Hsieh has responded to the negative coverage of his project (emphasis mine):

Since January 2012, Downtown Project has been working to help revitalize downtown Las Vegas through several hundred investments and initiatives. At this time, we are focused on streamlining our operations as we continue to execute on our plans. Doing so requires that we restructure our operations and focus on follow-on investments. We continue to evaluate all of our initiatives in terms of those that achieve the right balance of both ROI (return on investment) and ROC (return on collisions).

We remain focused on the long-term plan and the evolution of the downtown area. As such, we have restructured our support team. This change has affected approximately 30 positions, the majority of which were based in our corporate office. We continue to directly employ more than 300 people across our various operations in downtown Las Vegas.

We are optimistic and confident about the future of downtown Las Vegas and the continued growth of our entire portfolio of investments.

As news spread, we found that some of the local press jumped to their own incorrect conclusions and included many inaccuracies in their reports, which then the national media picked up which then led to an avalanche effect of a combination of incorrect facts and incorrect conclusions due to a combination of misinformation, lack of due diligence, and lack of proper context or history.

We’ve decided rather than answer questions one person at a time, we’d put together the questions we’ve received so the answers are available to everyone, straight from the source. As additional questions come in, this document will continue to be updated.

Return on collisions (ROC) is nonsense, pseudoscience. As Hsieh tilts the mounting criticism to ROI and ROC, his innovation algebra crumbles. Return on collisions isn't an empirical test. It's a foregone conclusion. Of course greater density fuels creativity. Edward Glaeser said so:

Other suburban corporate campuses—Google, Nike, Apple—struck him as isolated and insular. He wondered if a company could be like New York University, embedded in downtown Manhattan, with all of its buildings and no end of urban amenities within a five-minute walk. Edward Glaeser’s book The Triumph of the City described how cities unfold forever, driven by density and intense variety, while companies all eventually go stagnant and die. Maybe immersion in a downtown could help keep his company unfolding, and maybe bringing company start-up culture to a decaying urban core could restart its vitality.

Zappos bet the company on the idea. They took over the abandoned city hall in the dead-end part of Las Vegas known as Fremont East and spent $200 million buying up nearby properties, $50 million on local small businesses, $50 million on tech start-ups, and $50 million on education, arts, and culture. Hsieh’s strategy is to increase: “Collisions” (serendipitous encounters); “Co-learning” (a community teaching itself); and “Connectedness” (density, diversity, and reasons to engage). ...

... Hsieh figures that “collisionability” can be quantified and designed for. He thinks that street-level interaction can be made so rich that it compensates for the lower density of low-rise buildings, with 100 residents/acre. Thus he blocked off the skyway from Zappos’s parking lot to its headquarters in the city hall. Use the street. Make street activities really attractive. Active residents, he calculates, will experience 1,000 collisionable hours a year (3.6 hours/day, 7 days/week, 40 weeks/year). Ditto for “purposeful visitors” (12 hours/day, 7 days/week, 12 weeks/year)—you are invited to be one.

Hooray, I'm invited to be purposeful. I'm looking forward to my personal ROI from 1,000 collisionable hours a year. Must buy using Zappos. Creative class and jazz hands.