Amazon's HQ2: 'Why' It's Making The Move Matters More Than 'Where' and why mid-market should pay attention
For those who are consumed by who Amazon might choose for its second headquarters, or what kind of incentive package will be necessary to lure the online retailing giant to their city, perhaps the biggest question to ask -- and answer -- is why Amazon feels it's necessary to make such a bold move. Amazon's true reasons won't be revealed until it makes its decision, presumably somewhere near the end of the year (responding proposals to Amazon's RFP are due in Seattle in a month). But there's strong reason to believe that the winning bidder will be the one that provides the best answer to Amazon's unasked question.
Amazon's HQ2 bid might be the biggest economic development event in a generation. Every reporter, commentator and city boosters worth their salt are already placing bets. Even I speculated on a winner (or, more appropriately, a grouping from which a likely winner would emerge). Every city that remotely has a chance of acquiring 50,000 new high-tech workers and as much as $5 billion in new construction is frantically preparing its RFP response. And why not? The opportunity to vault your city from middling to elite status, or solidify your elite position, does not come along very often.
However, most HQ2 speculation reveals more about individual biases than anything else. Cities are clamoring to stand out for a variety of reasons. Most writers speculating on the decision are putting an emphasis on the merits of the possible winners; I started by considering Amazon's motivations, believing that the company's reasons ultimately will determine the outcome. As I considered those potential motivations, I'm left wondering -- is there a message Amazon is looking to send to Seattle, the tech industry, the West Coast more broadly and to coastal cities in general?
If so, we all need to take note of the message, and consider the ramifications down the road.
Lyman Stone, an economist with the Department of Agriculture and blogger, wrote a great piece last week on the topic. He concluded that no one city or metro has all the attributes that Amazon is seeking, and that, for the most part, Amazon will "have to create its own fundamentals" wherever it goes:
"Most site selection processes are fairly predictable, and decisions are often made well before bids are even solicited. Amazon may be different.
The scale of Amazon’s investment is so large that no city can absorb it without growing pains. Its RFP is sufficiently specific that no city can match every criteria. Its national presence is sufficiently diversified that no city has a home-court advantage. These are all the sorts of things that suggest that this site selection process may be different."
Amazon's motivations and message matter more.
Stone goes further by saying he "suspects" (as I do) that Amazon is looking for a city willing to grow with them, and have its growth path decisively altered by Amazon:
My guess is that Amazon is throwing the floodgates of submissions open because they’ve already looked at top-line data for most cities and came home unsatisfied...
That means that what Amazon is really looking for is something else: that special something. They’re looking, or if they aren’t they should be looking, not for a city with X number of college graduates, but idiosyncratically optimal bids. A particularly good site on the ground. A unique university partnership. A local government that puts particular effort into supporting a bid.
Here's what I mean about Amazon's message and how others should take heed. Regarding Seattle, the message could be that Amazon believes that their home city simply can't absorb more growth without negative impacts on housing prices and general costs of living, and that Seattle's ability to attract talent is nearly maxed out.
In fact, Amazon may be saying the same thing about the tech industry itself, and the West Coast locales where it's largely based. From its inception, today's modern tech industry has benefited from the kind of talent and innovation clustering that few places could match, but it's come at a steep price in the livability of those areas -- again, high housing costs and resulting steep inequality.
Taking it one step further, Amazon may also be saying that the East Coast cities that share the West Coast's livability issues, if not the same economy, are at or near their ceiling as well. And if so, Amazon's HQ2 search takes on a complexion entirely different than the typical corporate relocation derby.
At its heart, that's what seems to make Amazon's announcement so different, and why others are likely waiting on a decision with baited breath. If Amazon chooses a Rust Belt, Sun Belt, or affordable coastal city option (like a Chicago, or Dallas, or Philadelphia), it could be sending a strong signal to other tech titans that there is indeed opportunity outside of their natural habitats. If Amazon selects a smaller city in one of the same areas (like the Twin Cities, or Charlotte, or San Diego) it could signal to others that some cities would indeed be willing to change their trajectory to accommodate them.
I imagine Silicon Valley boardrooms and big city mayoral conference rooms will be full over the next several weeks. While municipal staff will be outlining their terms for an Amazon deal, Silicon Valley leaders will be strongly considering the implications of Amazon's bold move, and whether they need to take similar action.
Full story from Forbes online September 19th 2017
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