Tony Hsieh's New Twist on Hacking the Downtown Vegas Tech Ecosystem

By Sarah Lacy , written on July 17, 2012

From The News Desk

As I've disclosed a few times, my husband works in Las Vegas as part of Tony Hsieh's semi-crazy $350 million downtown investment. That means my family is embedded in the grand experiment for about a week every month. We are living in the same apartment building with the downtown project braintrust, eating at the new restaurants he invests in, patronizing all those new small businesses and meeting the startups who agree to relocate here.

As someone who has covered entrepreneurship for 15 years, it's among the more crazy attempts to hack the world in one's own image I've ever seen up close. And long after other reporters who've flown in for one meeting go home, I'll get to watch how it goes from the inside for at least the next two years. Already, I've seen a lot of good and not-so-good. And I'll regularly write about it.

This is, after all, a reality that most cities around the world are trying to hack: Can you consciously create a culture of entrepreneurship? Most government efforts fail. Can one man with a ton of cash do any better?

Another big reason I look forward to coming to Vegas once a month is to get plenty of time to write, because I don't have as many meetings with sources as I do in San Francisco.

Or so I thought.

Last night, I found myself playing with huge $12,000 foam legos that nearly took up an entire apartment until nearly 2 am with Paul Carr, Hsieh, one of my other investors who happened to be in town, another entrepreneur I hadn't seen in years, and an amazing company I can't wait to write about.

This all started when I went to the Downtown Cocktail Room to meet someone else, and by happenstance these other people were all in town and at the same place. We walked back to Hsieh's apartment across the street -- which is also in the same building as my apartment and Paul's apartment. We stayed up late building a life-size version of Mousetrap and talking about each other's companies.

A lot of what I'm seeing and hearing is off the record. But in just a few days, I've made some important new sources, deepened some existing relationships and negotiated at least one big exclusive. And here's the key: Many of the people I'm talking to haven't actually relocated to Vegas. They are just here checking it out at the same time I happen to be here.

I don't want to overstate this: Last night didn't change the trajectory of my life or anything. But it felt like one of those nights you have at a high-level conference like AllThingsD or the Lobby. You don't get them much, when you're at your usual home doing your usual job, because you are stuck in your routine. If you see someone, you more often than not try to make formal plans, and everyone in the startup world is too busy to make formal plans.

But when you artificially cram people into a weird situation, you get these little moments of serendipity. And that's where the deepest investor to entrepreneur, reporter to source, or even co-founder to co-founder relationships are forged. (That's part of our thinking behind regular PandoMonthly events as well.)

There are a million reasons to be skeptical of what Hsieh is trying to do in Downtown Vegas. Plenty of cities spend billions trying to resurrect downtowns and fail. In the grand scheme of things $350 million isn't that much for a project of this scale. And when you are moving more well-to-do people into a formerly blighted area, there is a minefield of public relations disasters to negotiate.

Many of the people who need to be sold, simply aren't. After Paul wrote this slightly Zappos-Kool-Aid-y post in PandoDaily's early days, one prominent Valley investor said to me, "There needs to be a disorder for people who think just because they've sold one billion shoes online you can rebuild a blighted city." Indeed, it's hard for some investors to take this whole Sim City in Sin City thing seriously. And I couldn't imagine a world in which I'd relocate PandoDaily here. Like it or not, the Valley is the center of the entrepreneurial universe for the foreseeable future.

But Hsieh's force of personality, his track record at Zappos, his floors of "crash pads" at the Ogden, and his private jet company all help him pull an astounding number of heavy hitters into this Downtown Vegas orbit. It's a way bigger roster of guests than any other city trying to build an entrepreneurial ecosystem from scratch could boast. And it doesn't hurt that most people regularly come through Vegas for conferences (or play) anyway. Nor does it hurt that it's generally an easy city to get to with a bevy of direct flights. While an unlikely tech ecosystem on many levels, Vegas is also surprisingly well set up for enabling this type of regular serendipity.

For instance, on my last trip here, a prominent CEO messaged me after seeing my Twitter update and said he was coming in for the fights but not to tell anyone. He wanted to know if I would like to have dinner. This is someone I know well, but in San Francisco I would have had to go through a PR person and an admin to get that much face time with him.

Hsieh wisely realizes there's some lightning in a bottle here, and he is trying to make this more of a conscious "thing." He told me last night -- amid the legos-- they are going to start doing regular "tech weeks" here. I assumed he meant once a year or so, like New York Internet week.

"No," he said. "We're doing it every month."

"Every month? Oh, God, what are you thinking?" I said. "That's way to much to sustain any level of quality."

 At first that sounded insane and overly know, like most things Hsieh announces he's doing. But as he explained, there are some 30 people from the tech world coming through to check things out every week. Some of these are surely smankers. But others are some of the Valley and New York ecosystems' heaviest hitters.

By grouping people who are planning on coming anyway in a given month, into a single week, everyone gets more serendipity and more value. That includes the people coming out, who are then encouraged to come out more often. It includes people whom Hsieh is trying to convince to relocate here. And most importantly, it includes the local startups in his portfolio that have the disadvantage of not having regular face time with the Valley set if they move here. Hsieh gets that for Vegas entrepreneurs he's backing to be taken seriously, serious people need to see what is happening here.

Here's where it gets even more ambitious: Tech is only one of the verticals he's trying to pull in experts around. The first week of the month always draws in the most guests, because there's this "First Friday" event downtown. (I'm frankly unclear why it's such a draw. They have them in many cities. It's just a normal street food / art fair as far as I can tell.) The plan is the week after that will always be the tech week. The week after that will be the fashion week, drawing in more of the LA crowd than the SF crowd. The week after that will be a mix of things like urbanism, happiness researchers, education folks -- important topics to what Hsieh is trying to build, but not essential on a weekly basis. "The idea is to encourage tech entrepreneurs and VCs and angels to come during tech week because there will be more tech content at the speaking venues and classrooms we are building," he says.

Indeed, last night, when he was showing me sketches of some of those venues, he noted that if each guest did a 30-minute TED-style talk, that'd be 15 hours of content a week on average.

As someone who puts on between one to three single-evening, one-guest events per month, I can tell you right now any sort of structured programming on this scale this consistently will take far more work than Hsieh realizes. But that almost doesn't matter. I, for one, will try to time my visits when other tech folks are here, and I probably won't go to any of the programming. I'll be here for the legos, the late night conversations, the relationships, and the scoops.

There's an important aspect to non-work face-time even when building companies that are software based and theoretically could be built by remote teams. This is why the Valley tends to produce the largest companies cycle-after-cycle, and why New York seemed to explode all at once when it got to that critical mass of culture, people, investors, and ideas. What Hsieh is trying to do differently in Vegas is manufacture that out of a combination of people moving here, and people just coming in and out on a regular basis.

"Re: That serendipity thing, yeah, it pretty much happens every day and night in Downtown Vegas so it was cool you got to experience it," Hsieh said over email today as we chatted about the Legos. "That's what makes Downtown Vegas so crazy exciting. Even before we've build anything physical, the serendipitous encounters happen literally at least 10 times a day (often within the hour) without any exaggeration. And you know from our history I don't tend to exaggerate."

He's right about that last point. Dream big, yes. Hatch insanely expensive plans, yes. Exaggerate, not so much.

[Note: Hsieh will be our guest at the September PandoMonthly in San Francisco. He is also one of many personal investors in PandoDaily.]