No room for gimmicks in urban revival.

Zappos Chief Loses a Las Vegas Bet

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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I had planned to make a pilgrimage next spring. After almost two years of putting it off, I was finally going to make the trek to Las Vegas to see the amazing new downtown that Zappos.com chief Tony Hsieh was inventing from of scratch. Like so many others, I was lured -- enchanted, even -- by the vision of the "Great American Techtopia," in which urban planning, tech innovation, art, music, and belief in community would come together to create the city of the future, blah, blah, blah.

Well, I was too late. Hsieh's Las Vegas Downtown Project seems to be in a state of collapse, following layoffs, infighting, and the seeming withdrawal of Hsieh himself from the direct management of the project. The dream may live on, but this incarnation of it looks dead.

I'm not inclined to crow about this. I was really rooting for it to win. Hsieh is an admirable role model, and I like both hipsters and tech-sters. I've always wished that people would find both the will and the way to replicate the achievements of cities such as Austin, Texas, which has combined tech with bohemian culture.

And I still hope Hsieh will manage to do that. Unfortunately, the Downtown Project simply didn't find a model that worked. What went wrong?

A clue, I think, comes in the phrase "return on community." This is a phrase that Hsieh had used to describe what would be gained from the Downtown Project. But when we use phrases like "return on investment," money is the input and more money is the output. If community is the input, what exactly is the return?

Maybe just money. If you read Hsieh's autobiography, "Delivering Happiness," you can see that he is an idealist -- a lot of his motivation comes from a desire to recreate the 1990s rave scene on a larger, more permanent scale. But that isn't necessarily true of the partners and employees he recruited to Downtown Las Vegas. True idealists are fewer than we'd like to believe, and most people don't have money to burn like Hsieh does. Many of Hsieh's people, unlike their boss, were probably in it for the money.

And here's the thing about cities -- they depend enormously on public goods. Natural resources must be made available. Infrastructure must be planned and funded. Schooling must be provided. Parks and other urban improvements must be included.

Because these are public goods, whoever provides them will not be able to fully capture the value created by them in the form of money. That is what it means to be a public good. And although modern libertarians may wave their hands and pooh-pooh the idea, no amount of soaring language or bold sweeping declarations can remove the simple fact that public goods exist and are important.

Normally, city governments provide public goods, usually by taxing the property of residents and businesses. They don't recoup their investments, but economic theory says that this may still be the optimal way for local governments to behave. Of course, governments don't always do their jobs optimally, as we all know. If you have a rich guy like Hsieh come in and do what the city government won't, it's a case of voluntary public-good provision -- the kind of thing that hardcore libertarians tell us can be a substitute for government.

Unfortunately, the Las Vegas Downtown Project isn't encouraging for the libertarian vision of cities. In the end, as Gizmodo reports, the project turned into just another for-profit real estate venture.

But that doesn't mean the dream of hipster/tech city planning is hopeless. After all, Austin exists. And to some extent, Austin was a planned community. But the man who was most responsible for planning it -- ex-politician Pike Powers -- didn't just bring together investors and business people. He brought together stakeholders who knew they would never see a dollar return -- government leaders, academics, urban planners. Together, they launched a multipronged effort that focused on providing adequate natural resources, building partnerships between academics and businesses, providing excellent education, building physical infrastructure, and luring human capital with an attractive and vibrant culture. If you've been to Austin, you've seen the result.

In other words, it's not enough to seek a return on community. The community itself must be the return.

I believe in Tony Hsieh. He's not done trying to create the city of the future; something tells me he'll be back. But when he returns, he should remember that creating great communities has to be about more than capitalism.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net