Why Big Tech Can’t Save the City

Perspective of Downtown Las Vegas.  Source: wikipedia.org

Cities are sociological models, not business or economic models.  One day we’ll realize that and treat them as such, and we’ll be much further along to having the kind of cities we want.

Tony Hsieh, the founder and CEO of Zappos and tech wunderkind, announced recently that he stepped down as leader of the Las Vegas Downtown Project some weeks ago.  According to recode.net:

Hsieh’s move comes as the project has laid off about 30 percent of its staff, or 30 people, which does not include the community of entrepreneurs funded by the project, these people said. Representatives of the project declined to comment. Hsieh did not comment on the details of his role, but said in an email that he never considered himself the “CEO” of the Downtown Project.

In a surprise all-hands meeting at the Inspire Theater a few weeks ago, Hsieh, whose $350 million in funding and vision turned 60 acres of Downtown Las Vegas into a growing tech city, told his staff he was stepping down and handing the reins over to his lawyer, Millie Chou. On Tuesday, the project laid off 30 percent of the staff.

The Downtown Project was an effort to revitalize Vegas’s downtown while utilizing the successful tech entrepreneurial model.    As seen on the Downtown Project’s website, the project’s mission is to “help make downtown Vegas a place of Inspiration, Entrepreneurial Energy, Creativity, Innovation, Upward Mobility, and Discovery, through the 3 C’s of Collisions, Co-learning, and Connectedness in a long-term, sustainable way.”  Or in other words, utilize the kind of entrepreneurial vigor that characterizes the tech sector for city-building.

The Downtown Project has an ambitious five-year plan:

Year 1 – 2012 – acquire/assemble land and start making tech, small business, and other investments

Year 2 – 2013 – fund/experiment – fire a lot of “bullets” (make a lot of investments) in a lot of different areas, and see which ones hit

Year 3 – 2014 – focus on optimizing core while finding the top winners to pick as “cannonballs” to double down our bets on (in terms of additional follow-on investments, resources, and time) while streamlining our other operations

Year 4– 2015 – continue to streamline and scale operations

Year 5 – 2016 – get to cash flow positive / sustainability

I admit I come to this piece knowing nothing about Tony Hsieh, Zappos, or the Downtown Project.   But I do know, through hard-scrabble trial and error in a twenty-year plus career as an urban planner, some of the elements involved in successful city-building.  And the first thing that strikes me about the five-year plan above is the lack of, uh, people.

The plan seems so preposterously top-down.  Let’s buy land!  Let’s find and invest in people with great ideas!  Let’s optimize our successes!  Let’s streamline and scale up!  Let’s get sustainable!  I don’t think it’s any coincidence that problems are arising as the project enters year 3, when optimizing success becomes a priority.  It’s hard to optimize successes when there are none.

What’s really troubling to me about the Downtown Project is its acceptance of a business model as a city-building model.  Business models like the tech model preferred by Hsieh and others wonderfully detail how entrepreneurs plan to turn investments into profits.  City-building, on the other hand, seems to work best when investors and entrepreneurs understand the culture and climate of a particular city, and work within those parameters to seek success and expand it.

Let me explain what I mean.  Everyone knows that Las Vegas’ strength as a city comes from gaming and entertainment, but the Vegas economy is also fueled by growth in customer service, call centers and back office development — things that can be more cheaply there than in California.  Together they form the foundation of the Las Vegas economy.

Did Hsieh and the Downtown Project understand this?  When the Downtown Project was investing in all sorts of innovative restaurants and bars, did they take into account the more downscale nature of many Las Vegas’ service economy foundation?

Imagine if the Big Three automakers decided to put a similar city-building model in place for Detroit circa 1960.  I imagine it would look something like this:

Year 1 — 1960 — acquire and assemble land for new neighborhood construction

Year 2 — 1961 — start up assembly-line production of homes and businesses, with built-in functional obsolescence that will keep buyers upgrading

Year 3 — 1962 — sell homes and businesses

Year 4 — 1963 — sell more, scale up

Year 5 — 1964 — get to cash flow positive/sustainability

The funny thing is, that’s almost exactly how it happened, save for the rapid-fire timeline and reaching sustainability, because the auto industry left its cultural imprint on Detroit.

And that’s why I say cities are sociological models and not business or economic ones.  They all work within the socio-cultural constraints and norms that are established at the time of their founding or greatest growth.  Doing what works in San Francisco or the Silicon Valley won’t work in Vegas, because Vegas is neither of those.  Doing what works in New York won’t work in Dallas, because it’s not New York.  Making your city the best it can be means understanding it as thoroughly as you can, and building on its existing foundation.

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