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Zappos, Tony Hsieh, and the Downtown Project are controversial subjects in some quarters of Las Vegas – although I have always been a supporter. In my opinion, it is hard to not give credit to Mr. Hsieh for having the courage, faith, and energy, to move his company and sink millions into the depressed center of Las Vegas, a city I love living in and call home.
That makes Aimee Groth’s tell all book about living inside, or at least partially inside, the bubble of Tony Hsieh’s circle throughout the first five years of the Downtown Project all the more difficult, and fascinating to read. With Ms. Groth becoming part, if not the driving force, of the narrative this is very much a piece of Gonzo journalism which gives some first person perspective to the stresses and confusion that many in the story recall.
To give some background, Tony Hsieh is the CEO of Zappos, an online shoe retailer which is owned by Amazon. In 2013, Zappos moved its headquarters into the former city hall building of Downtown Las Vegas. Downtown Las Vegas, and in particular the area east of Las Vegas Boulevard, had been a rundown collection of tattoo parlors, pawn shops, seedy bars, and ultra-cheap motels. With the result, it had all the problems of a depressed city center, with homelessness, prostitution, and drug dealing on most street corners. With Zappos’s move to Downtown, Mr. Hsieh created the “Downtown Project” with $350 million of his own money. Almost half the money was earmarked for the purchasing of real-estate with the rest to be invested in businesses and startups centered in Downtown Las Vegas. The stated goals of the Downtown Project was not only the creation of a new business and a technology startup environment, but to make Downtown a place with a thriving innovation culture.
The story follows Ms. Groth’s intial conversations with Mr. Hsieh and other invited guests to the Downtown Project, through partying and becoming part of Mr. Hsiehs entourage, the first cracks appearing in the startup culture, to the major reorganization of the Downtown Project, and the internal strife at Zappos due to the move downtown and Holacracy. Holacracy is a new management system and communication tool that was adopted by Zappos. I reviewed Brian J. Robertson’s book on Holacracy here.
However, the main thrust of “The Kingdom of Happiness” is on Mr. Hsieh’s, and those around him’s, response to these events and to their motives in the first place. As the story is told there is almost a willful lack of support, and management, given to the early entrepreneurs, lured to Las Vegas with promises of financing to follow their dreams and the expectation of mentoring. With the result that many were essentially setup to fail, or at the very least felt that way.
“…the young entrepreneurs who didn’t naturally seek out assistance or know how to navigate an ecosystem like this were left to fend for themselves.” – From The Kingdom of Happiness.
There is also a darker undercurrent that flows through the book, and that is the potential conflict of interest in the due roles of the Downtown Project as both landlord and investor to various new and startup businesses. At one point in the book an entrepreneur wonders at the oddness of trying to avoid their investor and business partner, because they are also their landlord. There are numerous mentions throughout the book by those in the Downtown Project, that a source of profits for the Downtown Project is the real estate rather than in the businesses they have investments in. An uncharitable reading might question the ethics, or morality, of this arrangement.
What I feel is the main takeaway from the book, and makes it of particular interest to business people, is the balance between Vision, Leadership, and Management, and how this seems to have gone awry at both Zappos and the Downtown Project. At one point Mr. Hsieh snaps at Ms. Groth that he is not a leader but a visionary and it is hard to argue with him. But if Mr. Hsieh is not leading then who is?
The move to Holacracy, a system that dispenses with traditional management structures, through the lens of Ms. Groth’s book, seems to be an imperfect answer to some difficult questions. There has been plenty of vision at Downtown Project and Zappos. There is also some merit in the argument that there has also been leadership at Zappos (you don’t undertake something like Holacracy without leadership pointing the way). But the cult of personality surrounding Mr. Tsieh, and Zappos’s focus on its non- traditional internal culture, maybe filling in for actual leadership.
What is clear, particularly at the Downtown Project, is that there has been a failure of leadership through a lack of management. In a drive to be different, focus on making things “happen,” and create a self-sustaining entrepreneurial culture, the basic structures and support networks have never been put in place that would seem to be a prerequisite for this type of project.
I, for one, am a supporter of the Downtown Project and Zappos – particularly for Zappos’s focus on internal culture. One only has to walk through downtown to see the enormous impact that Downtown Project and Zappos have had. However, there have been significant costs, and without examining the issues that The Kingdom of Happiness raises we are doomed to repeat them. In business, but particularly in the startup culture, there is a focus on leadership to the expense of everything else and an almost dismissal of management. What the story that Ms. Groth tells us is that visionaries abandon management at their peril and that leadership, while the key ingredient in all successful companies, cannot survive without good management.