Tony Hsieh: Entrepreneur, Community Builder

Much coverage of Tony Hsieh’s legacy has been, deservedly, about his business success. After all, Tony’s incredible track record in leading Zappos has been hailed by corporate and leadership experts for creating a fanatical company culture passionately committed to teamwork and customer service in a way that powered sustained growth over his 21 year tenure as CEO.

Entrepreneurs everywhere revered Tony for staying true to his vision and values in how he did that. Notably, he was the only example we could point to as a super successful entrepreneur not being Amazon’d after being acquired by Jeff Bezos in 2009 for $1.2 billion.

But the story not being given much attention is how Tony’s vision and values pointed the company, and others, to join him in making a social impact with a private sector driven experiment for rebuilding the dead end Las Vegas neighborhood of Fremont East — resulting in a community movement he spawned known as the Downtown Project (DTP).

Zappos started in the Bay Area, but in 2004 moved headquarters to the Las Vegas suburban community of Henderson. The appeal for Zappos was driven by a lower cost structure to scale up the company’s primary teams of customer service, logistics and support workers needed to fill all those online orders.

As the company grew, employees spread across different buildings in a suburban business park and with even faster growth anticipated following Amazon’s acquisition, the forecasted needs for more space spurred planning for a corporate campus that would be supportive of the company’s quirky and purpose driven culture.

Instead of pursuing the conventional path of another suburban location, Tony chose to head into a decaying urban neighborhood believing that immersing his team on a mission of looking outward to build community around them would strengthen company culture and innovation, eventually leading to redefining Zappos company purpose as “Delivering Happiness” across their 4 C’s of Clothing, Customer Service, Culture, and Community.

Building Community

With that purpose in mind, as Tony explored urban Las Vegas he was struck by the long vacant and deteriorating former City Hall building and its surrounding neighborhood of Fremont East. So began the odyssey to bring about transformational change that his vision, and Zappos values, would drive to be a legacy extending far beyond the company itself.

How does one guy inject purpose, vision and values into a strategy for building community?

Following Zappos’ 2014 move into the awesomely renovated former City Hall building, Tony Hsieh described the strategy as being focused on scaling up efforts behind Downtown Project’s (DTP) own 3 C’s:

  • Collisions: Serendipity that happens when people being in the right place at the right time result in starting of a new relationship that blossoms into downstream impact
  • Co-learning: People in the community teaching each other — including mentoring and helping at a person to person level without necessarily a paid role
  • Connectedness: The number and depth of connected relationships in the neighborhood

With this strategy, Tony and DTP’s private investors invested $200 million in real estate, $50 million in small businesses, $50 million in education, and $50 million in tech startups. The impact today includes 407 ongoing or completed construction projects, 61 small business investments and an estimated 130,000 annual visitors for the Life is Beautiful Festival and DTP-related entities.

More than the numbers, it’s the impact on life in Fremont East that can best be experienced by actually visiting there and talking with residents, many of whom have had their lives change as a direct result of the transformational change DTP had on the community.

Inspiring example for others

I had only been an occasional visitor to Las Vegas, not paying attention to the community. But as a Silicon Valley entrepreneur who boomeranged back to my Upstate New York hometown, I was on my own community building journey helping others start and grow companies in the newer industries across the downtrodden Upstate NY region.

Ever on the prowl for following innovators with similar goals, I started tracking news on DTP — particularly Tony’s thinking behind how engineering conditions could get more of the right people bumping into each other resulting in “creative collisions” that would ultimately lead to meaningful relationships entrepreneurs needed to find resources like mentors, investors, team members and customers.

That experience mapped directly to my own startup history beginning in the late 80’s as a rookie entrepreneur with zero relationships in the tech community. After some difficult initial struggles, it was the pivot towards targeting emerging tech that got me plugged into the openness and pay it forward nature of Silicon Valley. Those Silicon Valley creative collisions then led to my growing TriNet to what has evolved to become a NYSE listed company with $4 billion in annual revenues.

Along the course of that journey I relocated my family from Silicon Valley to my hometown in Upstate New York. By 2013, my non profit Upstate Venture Connect was in our third year of building a connected network across the state. We adopted a mantra of scaling up the volume and quality of creative collisions as a core strategy filter for choosing where we would put our energy and resources.

So I was elated to come across an Entrepreneurs’ Organization conference in Las Vegas with Tony keynoting on building community and an optional tour of the Downtown Project. Both were highly impactful for me, culminating with a debriefing in the DTP war room located in Tony’s apartment when he strolled in to chat with us fellow entrepreneurs and shared his personal insights “off stage” that gave us a true measure of the man he was.

In the years since, UVC’s community has grown to more than 16,000 people across our Upstate region, slowly evolving towards the connected community we envision. I recently published More Good Jobs, a book that shares that experience and outlines strategies for those who are trying to retain their city’s top talent. Yet in writing the book, I somehow missed mentioning Tony Hsieh. I’d been using the term creative collision so frequently over the last eight years that I even forgot to give attribution to Tony for both the concept and execution focus to make it work.

There was no bravado about his own role in creating DTP. Tony’s view was that it was all a community effort that he just helped bring together a few of the right people who were now making things happen.

Tony Hsieh’s story of the Downtown Project is rich and deserves to be told. Tony shouldn’t be remembered as just a renowned entrepreneur, but also as a community builder whose leadership continues to shape downtown Las Vegas and individual lives there.

Across America, there are lots of talent exporting cities with leaders looking for options on how they might do better at retaining their city’s top talent instead of watching the next generation move away in search of opportunities in the newer industries.

In hearing Tony’s story, who knows how many more people like me will be inspired to pick up where he left off. Orchestrating high impact creative collisions inside communities is one path Tony pioneered that can help us make a difference in impacting quality of life at scale.

Why Government Job-Growth Initiatives Fail to Produce Results

The following is adapted from More Good Jobs.

When a city struggles to create jobs, citizens tend to turn to the government to fix the problem. Politicians then attempt to allocate tax dollars for economic development or pass laws and regulations with the intent of stimulating job growth. However, as voters and taxpayers, we have to be asking – how often do these initiatives work out?

Not as often as they should. While many, if not most, elected officials are well-intentioned and truly want to do what they can to help stimulate job growth, the traditional paths fail to create results promised when initial announcements are made. 

When we look at past examples of government initiatives and break down the go-to methods of economic growth, it becomes clear that not only do these approaches fall short, but the government might be the wrong entity to stimulate the economy entirely. 

The Problem with Government Initiatives 

First, let’s look at the traditional path the government takes to stimulate job growth: tax-dollar allocation and building properties. 

There’s a core problem we see on both of these paths: the common belief that it is possible to create new jobs from the top down. Politicians tend to see job growth as something predictable and under their control, so we often encounter what I’ll refer to as the Field of Dreams mentality, a nod to the 1989 baseball film starring Kevin Costner. Think, “If we build it—a factory, office building, etc.—the jobs will come.” 

At an abstract level, this sounds completely logical. The problem is that it doesn’t work in reality. Couple the “build it and they will come” belief with the short-term focus politicians have in order to impress voters before the next election cycle, and you have a recipe for a lot of impressive-seeming actions without substantial results.

Politicians approach the problem from this angle because that’s what they’ve done for the last fifty years, and it fits the mold of top-down behaviors that look good in a press release. However, they’re trying to solve today’s problem with an old set of tools.

A History of Failed Projects

You don’t have to look far to find examples of failed government job creation projects. One notable instance in recent years was the New York State Film Hub based in Syracuse. 

In 2014, Governor Andrew Cuomo announced with great fanfare that the $15 million in taxpayer funds being invested to construct a new facility would create more than 350 high-tech jobs by having a university-operated hub blend cutting edge nano-technology with film production. “Hollywood comes to Onondaga County,” Cuomo said. 

Yet, three years after opening, the gleaming 52,000 square foot building sat virtually empty, having been used for a few short projects, and never coming close to living up to the Governor’s hype.

In 2018, after failing to secure commercial tenants or traction with film projects, the state transferred title to the facility to Onondaga County for $1, effectively writing off the $15 million taxpayer investment in the ill-conceived belief that the government can create businesses and jobs by funding construction of a building – much less the larger film industry subsidy issue which corporate subsidy experts roundly criticize. “Every state analysis I’ve ever seen finds that taxpayers get back only dimes on the dollar from film production tax credits,” says Greg LeRoy of the D.C.-based corporate subsidy watchdog Good Jobs First.

Not only did the film hub project fail to create jobs, but it also showed how the cozy relationships between politicians and property developers have the potential for corruption to creep in. In this case, the film hub developer was the governor’s largest campaign contributor at the time and also the sole firm to submit a bid on the $15 million project. 

A More Effective Way to Create Jobs

Patterns of “build it and they will come” and tax-dollar spending are not unique to New York State. They are repeated all over the country with similar results. 

Politicians allocate taxpayer dollars to build a building in a heartbeat, but that effort does nothing to actually create jobs beyond the construction phase, nor does it have any impact on accelerating the launch of new startup companies. 

What does work?

Despite the poor record of tax-and-construction projects, politicians need not be the enemy when it comes to creating good jobs. When they take the long-term view and understand the needs of entrepreneurs, public officials can be strong allies. 

Most of them got into politics because they truly care about helping people, and if entrepreneurs like you help them see a better path to serve the community, some will get on board in ways that support job-growth ambition. 

Most importantly, with or without politicians’ help, job growth and change needs to come from the bottom-up, not from the top-down. Entrepreneurs understand far better than politicians what creates jobs. Therefore, we can use time and resources to most efficiently change our local economies. 

 

For more insights on how to transform local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.

 

Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.

 

Vote, then find your tribe to drive change that matters

As a newbie author, I am finding lots of exposure opportunities to spread the message of More Good Jobs through the expanding medium of podcasting.

Each podcast interview I’ve been invited to has been interesting and generated great discussion. Enough so that now we’re working on putting show notes on the More Good Jobs press section with the aim of helping our community dive right into the particular themes they’re most interested in.

With today’s election being top of mind for everyone, I’ll highlight last week’s MergeLane podcast with host Elizabeth Kraus. She pressed me on certain issues as no interviewer had done, including on topics that set up an interesting dialog about how we as entrepreneurs, investors and community leaders can do more than just show up at the voting booth if we want to drive systemic change.

The total podcast is about an hour long. The first half hour or so sets up More Good Jobs themes profiled in the book, along with Elizabeth sharing perspective about her view of startup community from being based in Vail, Colorado.

All good stuff, including Elizabeth pushing back a bit on my assertion around the difficulty of attracting VCs to invest outside the Magnet Cities known for being tech hubs.

However, the last third of the interview is where we start diverging from standard MGJ interview themes.

You can access the interview here:

Episode 36: Pre-Election Advice for VCs + The Value of Talent-Exporting Communities, with TriNet Founder Martin Babinec

The following show notes may help in navigating directly to the time in the interview for these political and cause related topics:

43:02 – What led to my deciding to become involved in the political realm, including running as an independent candidate for U.S. Congress in 2016?

46:34 – How can entrepreneurs and investors (who have lots of choices and competing demands) balance their professional ambition with a desire to bring about bigger change for a cause they believe in?

49:40 – What are the structural issues accelerating such polarization between our two parties? What can we do about it?

54:07 – Whatever cause we are passionate about, how do we go about building a tribe of like minded people that might come together to do something about it?

56:10 – What is one non-obvious thing every VC and entrepreneur should do before the election?

Here are some of the organizations and resources mentioned in the podcast:

Upstate Venture Connect – Non profit building startup ecosystem across Upstate NY (profiled in More Good Jobs)

Upstate Jobs Party – Independent body and PAC building voter and political engagement to increase Upstate NY’s talent retention and grow stronger communities

Unite America – Non profit leading advancements in political reform to drive structural changes in the electoral process

Right To Start – Non profit campaign to rebuild the American economy by unleashing entrepreneurial opportunity for everyone

Yes on 2 – ballot measure in Massachusetts for Ranked Choice Voting

Ballot Ready – Company that activates and empowers an informed and engaged electorate.

Many thanks to Elizabeth for an engaging interview that stimulated great discussion. I hope some of what we shared might stimulate more thinking around options we have to help bring about change we believe in, well after we leave the voting booth.

The Problem with Public Money Going to Private Companies

The following is adapted from More Good Jobs.

A long history exists of government funding that targets healthcare, environment, defense, or other societal needs. While it makes sense to allocate some public dollars toward research being conducted by colleges and companies, a grayer area creeps in when public funds go into commercializing a new technology or expanding production capacity, both of which become assets owned by a private company to grow their business. 

The attractiveness from a political standpoint is clear: let the government write a check to a company as part of an economic development effort to create jobs. But who really wins with these initiatives?

More often than not, the private company wins, the government comes out looking like they’ve made an effort, or nobody wins at all. But despite the public footing the bill, citizens like us almost never see real benefits. In fact, what is meant to be a major job-creating effort turns out to be a waste of money. 

The Government Can’t Pick Winners

The biggest problem with public money going to private companies is that it puts the government in the position of picking winners. 

History has shown us the government’s track record for picking winners is horrible. A recent paper from Columbia Business School and Princeton claimed researchers found no evidence that tax incentives given to individual companies increased overall economic growth. Furthermore, the study found that almost a third of total state economic development incentive spending “went to .0072% of new firms and 1.41% of all jobs created by those firms.”

Professional investors with their own money at stake have a hard enough time predicting which companies will grow. Even the best professional startup investors in the world pick more losers than winners. To expect a government bureaucrat to be able to outperform these investors is ridiculous. 

Publicly Funded Publicity Stunts

Putting politicians in charge of deciding which companies will be the beneficiaries of public support starts going down a slippery slope, with economic consequences that are rarely transparent. It opens the door for corruption, where instead of choosing the company best positioned to create jobs, politicians might give the benefits to a political donor or other special interest. 

At best, the results are that these efforts underperform and fail to create the promised number of jobs. At worst, they’re little more than a publicity stunt for the politicians and companies involved. 

When the government is in the position of choosing private beneficiaries without transparency, taxpayers aren’t shown the magnitude of tax dollars invested per job created or have awareness of any other alternatives that might grow more jobs. Instead, all attention is given to the ribbon cutting photo op with a collection of politicians vying for the opportunity to lay claim in saying, “Look at what I did for you.”

Often, it doesn’t matter to the politicians whether or not their initiative was successful, only that it reflects well on them. Suffice it to say, in this scenario, the public loses. 

Even Successful Companies Can Fail to Deliver Results

You might think, politicians simply need to choose the right companies to support, but even successful corporations regularly fail to meet expectations. 

For example, New York State under Governor Andrew Cuomo spent $750 million to build a solar panel factory to be used by Tesla, which had promised to create 5,000 high-paying, high-tech jobs upstate—3,000 of them in Buffalo. Yet the company has fallen short of its 2020 job creation goals. Worse, the state then lowered expectations from what was originally promised. 

According to the Albany Business Review: “A Vanity Fair story in August found the state quietly changed the requirements Tesla must meet in exchange for its $1 lease on the Buffalo factory. The requirement for 1,460 “high-tech” jobs at the factory was watered down to jobs of any type. An agreement to hire 900 people at the factory within two years of construction ending in 2017 changed to 500. And the timing for creating additional jobs was extended to 10 years after the factory was completed.”

This example shows that even when relatively successful companies are involved, government efforts often fail to create meaningful jobs in the numbers needed to help our communities thrive. 

It’s Time to Ditch the Top-Down Model

In the quest to create good jobs, public money going to private companies is not the answer. Tax incentives, government-built properties, and other benefits fail to produce results. These strategies have not proven their ability to create more good jobs at a cost that makes sense to taxpayers. 

Instead, when we look at the places where true, organic creation of good jobs has happened, we see that it hasn’t been fueled by top-down policies or tax incentives. Good jobs come from the bottom-up, in which the best job generating communities embrace innovators and attract young, educated workers. Local entrepreneurs and community leaders in these talent magnet cities foster environments in which startups and innovative companies can thrive. 

If more communities embrace a long term commitment to embrace these principles, we’ll have a chance to see tax dollars spent on more meaningful community investments – as opposed to the overhyped and underperforming ploy of putting our money into the coffers of private companies. 

For more insights on how to transform local economies toward job growth in newer industries, you can find More Good Jobs on Amazon.

Martin Babinec founded NYSE-listed TriNet, a Silicon Valley cloud-based HR service, where he served as CEO for the company’s first twenty years. Relocating to his hometown of Little Falls, New York, he founded nonprofit Upstate Venture Connect, StartFast Ventures, and UpVentures Capital, all of which help grow, support, and invest in transforming Upstate New York’s economy toward job growth in the newer industries. As an independent candidate for New York’s 22nd Congressional District in 2016, Babinec also founded the Upstate Jobs Party (UJP) to influence political discourse on better solutions to grow jobs and reverse regional population decline.