Amazon Is Not Coming; Your City Has Already Lost

Sorry to say, but your town lost the Amazon HQ2 game, and before the game even began.  Amazon’s top executives have known for some time where they are putting their new headquarters – or at least they had it narrowed to two or maybe three contenders.  The whole frenzy of the last month was a very shrewd way of getting publicity and driving the best bargain.

Some places have taken a pass (why sit this out Saskatchewan?).  But 238 proposals were submitted – which means 237 losers.  Your city is likely on a fool’s errand.  But you can take solace that your town is not as delusional as Tacoma (excepting you Tacoma readers out there).  If there is one thing we can be certain of, it’s that HQ2 will not be built a bus ride away from HQ1.

The real guessing game is not who will win the Amazon scramble, but who has already won the Amazon scramble.

Responding to America’s obsession with Top Ten lists, everyone and their brother has come out with their own.  Most have taken Amazon at is literal word and based their analysis on the company’s laundry list of preferences.  But, the company never said which ones matter the most and which ones are throw-ins.  Without that information, the outside world is left to separate the wheat from the chaff with few bothering to weed out the chaff.

The listmakers ignore that some factors conflict.  For example, the desire for a major international airport and robust mass transit would limit Amazon only to very large cities.  However, these cities are also very expensive and high expense is one of the reasons Amazon is looking outside Seattle.  Currently, Seattle is the 10th most expensive city in the US.  Big airport, mass transit cities New York, Boston and Washington are all more expensive.

The stable business and tax structure requirement may be a canard.  Depending on the definitions, too many cities and states have questionable finances.  However, the epic dysfunction and corruption in Illinois and Chicago may well be too much.

So, what does Amazon really value?  Labor supply.  Amazon is built on ever-improving its technology.  The key for the company is pulling in a continuing supply of top talent in software design and attracting top managers.  Will elements of top management be willing to re-locate to the new HQ2?

The listmakers have also left out is that one person will make the final call – Jeff Bezos.  While Mr. Bezos won’t ignore the numbers, there is zero chance that Mr. Bezos will look only objectively at the numbers.  The preferences of Mr. Bezos, his top managers’ preferences and the overwhelming importance of labor supply makes the Amazon choice not so much a numbers game as a detective story.

It seems likely there are four qualifiers not made public.  First, Amazon is looking at diversification of location, thus it seems rather unlikely HQ2 will be on the west coast.  Second, given Mr. Bezos’s outspoken position on climate change, it seems unlikely he would consider the sizzling desert (Las Vegas, Phoenix, Tucson) and low-lying Florida (Miami, Tampa, Jacksonville) as too risky – and add Houston and New Orleans into that mix.  Third, the one million population cut-off is pretty low and likely a ruse to expand the number of applications.

The fourth qualifier is the most confounding and that is politics.  And I don’t mean partisan politics, rather the politics of power.  Amazon is a dominant company in Seattle.  While Microsoft, Boeing and Nordstrom (among others) are a major presence, no company is as big, wealthy and important as Amazon.  Part of the reason for HQ2 is that the very size and explosive growth of the company has resulted in a major political backlash.  Rising housing costs and the often unwelcome transformation of Seattle neighborhoods is threatening Amazon’s image and political position.

In spite of this backlash, Amazon is still the biggest kid on the block – and my guess is that they really like it that way.  For HQ2, Amazon likely wants a city which won’t just pony up big initial incentives, but a city that will respond to Amazon’s needs in the future.  If that’s the case, then large cities like New York, Boston and Washington would be out of the running.  Another intriguing candidate, Philadelphia, would have trouble too – since Philly is Comcast territory.

In the end, where will Amazon go?  The most tantalizing clue is where Amazon currently has research centers outside of Seattle.  Those six cities are Atlanta, Austin, Boston, Minneapolis, Pittsburgh and Portland.  After removing west coast Portland and too big Boston, that leaves four cities that fit the size requirements, have strong local high technology clusters and prominent research universities:  Atlanta, Austin, Minneapolis and Pittsburgh.

Is Atlanta too congested?  Can the progressive Bezos pick a city in Texas?  Can Minneapolis or Pittsburgh attract and retain talent?  Tough to say.  But if I had to bet, I would put my chips on those four cities.

Perspectives expressed in op-eds are not those of The Daily Caller.