The Devilish Ingenuity of the Amazon HQ2 Pageant

For over a year, Amazon has pitted cities against one another like contestants on “The Bachelor”, and with it nearing an end, the drama is peaking.

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(Image via: CNN)

It was a bright cold day in September 2017 when Amazon announced that it would be opening a second headquarters. Where and when HQ2 would be doing so, was something the tech hydra was leaving to municipalities across the United States, and even some in Canada, to decide.

Amazon’s sales pitch to the nation was this: “Our second headquarters will be a $5 billion — that’s $5,000,000,000 — investment in your city that will generate 50,000 new jobs, with an average annual salary of $100,000. Along with that, your city will be subject to unyielding development and new-found prestige the likes of which can be seen in Seattle today.

What then followed was a months-long contest between municipalities across North America vying for the eye of Amazon, the online book-seller-turned “Everything Company” Jeff Bezos founded in his garage in 1994.

Cities offered billion-dollar tax incentives, and because that was a staple of all the offers, the contestants had to get creative. New York lit the Empire State building in an orange tint as part of their bid for HQ2. Arizona decided the cherry on top of their bid would be to rename their state “Amazona.” “Calmazon” was pondered, which is actually perfect because that name really illustrates that cities will go as far as erasing their own identity to woo Amazon. (This particular city is Calgary.)

If it sounds like there was a lot of pageantry, that’s because there was, and it reminds me of something that may seem worlds apart: the National Basketball Association. Allow me to elaborate.

Almost every summer, when the NBA is in it’s off-season, there is a star player that’s a free agent and is tasked with evaluating the league’s other 29 teams as a potential home. And because the ultimate deciding factor in basketball is talent, these players are highly coveted, which means that teams pull out all of the stops. Wining-and-dining, private jets and clubs, city-wide billboards, pretend jersey retirement ceremonies, and celebrity recruiters are just some of the tools in the tool-bag teams use in hopes of securing a long-term relationship with a star player.

This is essentially the basketball version of what’s happening between cities and Amazon, with one significant difference: free agent signings in the NBA work out for teams most of the time —apologies to the New York Knicks and Amar’e Stoudemire — while the jury is still out on whether securing HQ2 would actually be good for a city.

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(Image via: Axios)

The biggest reason is that the effects of Amazon choosing your city as the locale for HQ2 is not the same for everyone in that city, in an “All animals are equal but some animals are more equal than others” type of way:

“If you actually get a job at Amazon or have the kind of job skills that you plausibly could get a job at Amazon, this will pay off for you because you’ll end up with higher wages that more than equal the higher rent. But if you work in a restaurant or cut hair or clean houses or a drive cab, you’ll probably end up worse off.”

This is the case because as the city becomes inundated with more and more of the upper-middle class, the city starts to transform itself into one that leaves the non-upper and non-middle class behind. This is part of the reason why homelessness in Seattle is a significant problem. Even the attempt at wooing Amazon itself is indicative of this. In a D.C.-area petition, activists shared their thoughts about the mayor’s flirtation with Amazon:

“In a city with a housing and homelessness crisis, where tens of thousands of longtime black residents have been pushed out over the last decade, our city leaders are clamoring to bring in up to 50,000 new, likely affluent residents, without any conversation about the impact on longtime residents.”

Which brings us to the devilish ingenuity of Amazon:

“Amazon was very clear, when it talked about where it wants to be located, that it wants places with good transit and all these other amenities. Those things cost money. If you want to reap the benefits of that, you have to pay for it; instead, they’re asking for a subsidy.”

I don’t watch The Bachelor, but I’m sure there is some ridiculous analogy I could make here to really help this sink in. The crazy part is the cities across the United States have bought into it, hook, line, and sinker.

Credit where credit is due, though. Amazon managed this entire process extremely well. In opening up the competition to the United States and beyond, Amazon acquired a humongous trove of data about cities across the nation. As Stacy Mitchell of the Institute for Local Self-Reliance points out:

“[Amazon’s] learned all kinds of things from the bidding cities — like their future infrastructure plans — that even their citizens are not privy to.”

She also notes that it’s not unrealistic to think that “Amazon will put this data to prodigious use in the coming years as it looks to expand its market power and sideline the competition.” There are few things more valuable in 2018 than data.

My personal theory about Amazon and it’s search for a second home is this: Amazon knew where it wanted to build HQ2, or at least narrowed it down to a shortlist, before they even made this search public. However, making their desire known would reduce the leverage they would have when they’re sitting across the bargaining table from the city. So they send out an open invitation for requests, turning it into a competition, and hope the location(s) they have privately identified send in offers, and they retain the power. Amazon narrows down the list of offers, using the nature of competition to extract better offers, and once they’re at the bargaining table with the cities they’ve selected, each of the other offers they received can now serve as a chip to bargain with. “You’re offering us $1 billion in tax incentives? Arizona offered us $3 billion.”

In early November, it was reported that Amazon plans to build HQ2 in Long Island, New York; and Arlington, Virginia. It will be interesting to see how that decision was reached, but people are starting to see the shrewdness of how Amazon handled this “competition.”

Let’s just hope everyone knows what they’re signing up for. Or maybe not-knowing is what makes the thought of being Amazon’s second home so enticing. At times like this, I’m reminded of a scene in Family Guy where Peter is asked to choose between a boat that he and Lois have always wanted and a mystery box. His response: “A boat’s a boat, but a mystery box can be anything. It can even be a boat!” Something tells me that like Peter, the winners of this pageant aren’t going home with the boat.

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I strive towards a career that ends up leaving me somewhere between Howard Beck and Howard Beale.

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