Hsieh cult suddenly forced to face reality

The cult of Tony Hsieh developed a crack this past week, and that’s a good thing.

Good for Las Vegans jaded by decades of hot air of an endless string of “visionaries,” and good for Hsieh and his acolytes as they attempt to put down actual business roots in downtown’s hard-packed soil.

News of the layoff of 30 employees from Hsieh’s much ballyhooed Downtown Project development group set media tongues clicking and hands wringing at the possibility that the celebrated Zappos.com CEO was suffering from blurred business vision.

Hsieh, who has marketed his “Delivering Happiness” corporate worldview into celebrity status and has been widely portrayed in the press as a guru of goodness out to save a care-worn downtown Las Vegas from utter decay, was compelled to acknowledge the cutback of 10 percent of the Downtown Project’s staff in an attempt to improve efficiency.

“At this time, we are focused on streamlining our operations and focus on follow-on investments,” Downtown Project’s statement reads. “We continue to evaluate all our initiative in terms of those that achieve the right balance of both ROI (return on investment) and ROC (return on collisions).”

Return on investment? What a concept.

With its bohemian vibe and Hsieh’s masterful media mambo, the Downtown Project has bankrolled some small businesses and has attracted international attention to the Fremont Street corridor. That has generated a lot of good copy, but the development group can’t be satisfied with the tangible results so far.

I don’t count a mini-mall made of metal shipping containers as a ringing business success.

The apparent hangover at the Downtown Project came as a big disappointment to some of Hsieh’s true believers, who bought into his rhetoric like kids waiting in line to sit on Santa’s lap. They should have known better.

David Gould is one of several examples. A former University of Iowa administrator, he moved to Las Vegas to become the Downtown Project’s “Director of Imagination.” Just imagine how that will look on his résumé after his recent resignation.

In a crestfallen Facebook post Gould wrote, “ ‘Business is business’ will be the defense from those you have charged with delivering the sad news. But we have not experienced a string of tough breaks or bad luck. Rather, this is a collage of decadence, greed, and missing leadership. …”

What was your first clue, professor? The nebulous business plan? The daily booze-fest? The suspicious suicides of other true believers? Overpaying for real estate? Bankrolling fledgling businesses in an apparent effort to show progress that defied economic gravity?

Or maybe the fact the project needed someone called the “Director of Imagination” to help sell a large-scale real estate acquisition?

“In the end,” brokenhearted lover Gould concluded, “the only thing (the remaining employees) will know for sure is that their leaders lied to them in order to hurt their friends.”

Next thing we’re going to learn is Kriss Kringle has a glued-on beard.

Like the Wizard after the curtain has been parted, Hsieh and the Downtown Project hustled into damage control mode. The zen and butterflies chatter was replaced by statements about “streamlining our operations.”

If anyone has been paying attention, that was Hsieh recently spotted on the road in Santa Fe, N.M., making with the redevelopment guru routine and Power Point presentation to a group of potential investors. Why, you’d almost think his work in downtown Las Vegas was finished.

The Downtown Project has been flying with a philosophy of creating “collisions,” which I suppose means generating business traffic and a sense of place. In other words, there hasn’t been a discernible master plan.

As groovy as that sounds in theory, in fact the area needs the equivalent of anchor tenants capable of attracting enough of those, ahem, collisions, to actually turn a profit.

The Downtown Project has been busy spending upward of $200 million on real estate acquisition and, officially, another $100 million on tech startups, small businesses and community education. But after more than two years it looks a lot more like a real estate investment group than the savior of downtown.

Whether the Downtown Project reinvents the old heart of Las Vegas or ends up packaging the land and selling it to another developer, its effort hasn’t been wasted. But the layoffs should provide everyone a reality check.

If losing 30 workers spells the beginning of the end of Hsieh’s Downtown Dalai Lama routine, that’s a good thing.

If it’s a sign the Downtown Project is actually sobering up its business model with an eye on the long run, that’s better still.

John L. Smith’s column appears Sunday, Tuesday, Wednesday, Friday and Saturday. Email him at Smith@reviewjournal.com or call 702-383-0295. Follow him on Twitter @jlnevadasmith.