At the CityLab summit in LA yesterday—right about the time that Tony Hsieh's Downtown Project was supposedly laying off a third of its staff—I was having a conversation with a young, excitable urbanist who was heading to Vegas to see the Zappos CEO's $350 million instant neighborhood in the city's revitalized downtown for himself.

He was checking out the project to get ideas for how to make his own city work the way he'd heard downtown Vegas was already succeeding: by funneling investment towards local businesses, launching co-working centers, and infusing aging infrastructure with new life.

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The thing is, even with all those promises, as many are pointing out this week, the ambitious project is letting down its residents and setting up the neighborhood for failure. Here's why.

A brave new idea

The Downtown Project estimates that some 400-600 people like this young urbanist come to town to see their work every month. In January, I was one of them, spending a week on the ground reporting on what I saw and meeting these wide-eyed pilgrims who flocked there to experience this brave new idea.

But this week, one of them, named David Gould, resigned in an open letter to Hsieh, amid a boatload of problems that people are saying marks the failure of the initiative. I was able to speak to Gould to find out what he thought went wrong, from a city-building perspective.

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For the idealistic urbanists (like me!) Gould's concerns prove something larger: Startup culture doesn't translate to the streets.

A muddied vision

Like many of the Downtown Project believers, Gould didn't move to Vegas to help redevelop downtown Vegas specifically, although that was certainly a part of his job. He moved to Vegas because he wanted to be part of a bigger urban idea, one that was guided by Hsieh as a kind of spiritual leader (and it is quite spiritual—borderline cultish).

"The higher calling to me was that 75 percent of the world is going to live in a city in our lifetimes, and cities are filled with social challenges, and if we can begin to solve those problems then transparently share them with other cities—and these are Tony's words, not mine!—then we can save the world," he says. "That's what got me up in the morning."

That was the same rallying cry that likely brought those hundreds of people to town—heck, that was the basic idea that got me to buy a plane ticket to see it. Yet it also smacks the most of the frenzied language that you're likely to find around VC funding, and how it gets manipulated over time. Startups pivot all the time, changing their logos and tag lines and even their core values. The Downtown Project became notorious for revamping its language so much that it left out key elements which had attracted its followers in the first place.

Losing "community"

Gould thinks the most problematic change in focus came in 2013 when the Downtown Project rewrote their own mission statement, removing "community" as one of the "three C's" in their strategic goals. "They didn't ask me, but my argument was that it was the wrong way to go," he says. "I would have argued and did argue that instead of being on the defensive, let's reclaim the word."

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Instead, the "return on community" was replaced by a new word: connectedness, a word that I'd argue is far more ambiguous, and perhaps purposely so. For Gould, the word community meant a focus on people, from Downtown Project employees to the city's growing homeless population, and that change in language meant people no longer mattered. Community means something very specific when it comes to neighborhood redevelopment. Connectedness? Sounds like a networking event.

Now, the strategy document is filled with startup speak like "bullets" and "cannonballs," which, while great for talking about a business strategy, doesn't work for, say, schools and healthcare companies, he says.

Fleeting projects

Those bullets and cannonballs Gould mentions are part of the "see what sticks" mentality borrowed from startup culture: the constant launching and shuttering of projects. In fact, the temporary, pilot-program nature of developments like the Container Park was actually something that attracted me to the project in the first place (I likened it to Burning Man).

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But while I wanted to admire this development style, the philosophy can't possibly sustain larger, brick-and-mortar businesses in the real world. There seemed to be a real disconnect between the fact that these projects were not just vaporous startup concepts in need of funding, but actual companies, run by humans.

Nellie Bowles from Re/Code had started publishing a multi-part series on the Downtown Project just last week, and in yesterday's installment she was able to wrap these latest developments into the demise of Factorli, a highly touted local manufacturing center. It vanished last month, along with several other startups that I'd visited or learned about on my visit. She talks to many of the people who have quickly moved from disenchanted to unemployed because of the "fail often" attitude.

No long-term vision

The same capricious nature of failing startups applied to the long-term plan: There was no long-term plan. A typical redevelopment plan for a downtown area would tackle issues from housing to transportation holistically in decade-long increments. The extent of the Downtown Project's "master" plan was five years.

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While the Downtown Project's timeframe might work for investors in a startup, when you're selling people on a vision for a city, they need to see a long-term overall vision that looks farther than that. When someone buys a condo or a building in your neighborhood, they're signing at least a 30-year mortgage. You don't mess with people's lives—and their homes and their families—like you do with investment dollars, says Gould. "When you're dealing with human capital, then there's a responsibility."

This is something that any urban planner would have pointed out. But even though Hsieh's idea for Vegas was reportedly guided by urbanist theory, there seems to be a real reluctance to work with the people who do this kind of stuff for a living. There have been no urban planning or architecture firms brought on as consultants or even advisors—all of those folks should have been working closely with the project from the beginning. It wouldn't be too late to bring some of them on now.

What now

The Downtown Project's sudden pivot (restructuring? reorganization?) doesn't mean downtown Vegas will suddenly become a ghost town. Hsieh did move the Zappos headquarters downtown, bringing new life to the area—there are new restaurants and bars succeeding from serving those employees. The city has its own plan for how to spur economic development that will likely continue to succeed despite any collaboration from Hsieh's team. (In a statement, City Hall was supportive—and referred to the project like a startup: "We understand that the Downtown Project is the in process of reorganizing and restructuring. This is common in any business to stay competitive and viable.") And many of the 300-ish startups and small businesses that have been funded with Downtown Project capital (they claim to have created 800 jobs) are also completely independent—many of them will thrive.

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But the reason many are heralding the demise of the project's vision is reflected in the tone-deaf statement released by the Hsieh in response to all this week's stories (this is instead of replying to journalists who requested comments). It doesn't read like a statement from a committed neighborhood organization. It doesn't even read like a giddy startup. It reads like a traditional real estate developer.

This part of Hsieh's statement says it all:

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

Compare that to the original mission statement, from 2012:

We are a group of passionate people committed to helping to transform Downtown Las Vegas into the most community-focused large city in the world. We are doing that by inspiring and empowering people to follow their passions to create a vibrant, connected urban core.

Gould refuses to criticize Hsieh's work—and he is quick to reiterate that he still believes in his original idea. "You've got a business guy who wants to put his personal money in, he does something seemingly bigger than himself, and he does that in a way of tremendous courage," he says. But to him, the statement is almost like the Downtown Project is saying it never meant to be anything more than a real estate investment. "If I'm only a developer then I'm no longer telling you I'm changing the world, so if I don't do it, it doesn't matter."

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What was once an interesting prospect for a new way of city-building—one that we all hoped to learn from—has now been completely stripped of anything mildly aspirational.

Now the Downtown Project is just another real estate developer. No one goes to visit a city to be inspired by one of those. It's not going to lure the eager investment it once did. And it's not going to get anyone up in the morning.