Chasing Amazon HQ2

 

Jeff Bezos will soon be confronted with a fascinating decision. Public officials all over the country are claiming that they can provide the perfect site for Amazon’s new second national headquarters.  And who can blame them if they engage in a little hyperbole. After all, the winner of this sweepstakes is looking at the prospect of 50,000 new jobs and being home–or at least partial home–to one of the world’s leading tech giants.

The  announcement that the company was looking for a second headquarters site included a set of selection criteria sufficiently broad to encourage a lot of applicants.  Chief among those criteria are a highly educated workforce, access to good transportation and location in a major metropolitan area.

If applicants have visions dancing in their heads of becoming the next Seattle–a booming tech center–they might want to take a close look at the characteristics of that city which have made it so appealing to Amazon.  There’s actually a bit of circular reasoning involved since Amazon has clearly helped transform Seattle even as it has thrived in the atmosphere of the Pacific Northwest location.

I recently spent several days there and, as a result, suspect that it won’t be as easy to appeal to Bezos as it might appear from the selection criteria.  Seattle is home to a large major research university, the University of Washington, as well as numerous other institutions of higher education in the Pacific Northwest.  It’s also true that Amazon has attracted lots of bright, ambitious employees from all other the country, indeed all over the world.

Access to good transportation certainly includes having a major international airport. But transportation within the city also matters. Seattle’s mass transit is more buses than rapid transit, but it helps that the core of the city is not terribly large.  Riding buses to Seattle attractions, we saw lots of casually dressed and relatively young workers arriving around 10:00 am each morning.

Amazon HQ1 is located in the heart of Seattle.  Would the company really consider a suburban location?  Perhaps, but it would be a significant departure from the model that has developed in Seattle.

Amazon is such a behemoth that its arrival in a second headquarters city will help shape the future of the place.  This is more than just lots of new jobs, although that in and of itself would be transformational for most cities.  Amazon may well prefer that kind of dominant role and may, as a result, avoid a location like New York City where it would just be part of the crowd.

My guess is that the overriding factor in the decision that Bezos ultimately makes will revolve around quality of life for employees.  Again, think of Seattle as a model.  Progressive political environment, lack of extreme weather, cultural amenities, easy access to the outdoors, casual lifestyle.

Based solely on that perspective, Amazon HQ2 would most likely end up in Portland or Vancouver.  That’s probably not going to happen, although it wouldn’t be impossible.

Then the question becomes what locations meet the basic criteria and also provide an attractive quality of life.  The Internet is flooded with educated as well as wild guesses about the likely winner of this megabucks challenge.

Many contestants will approach the issue with a very traditional economic development bid.  What tax breaks and other incentives can be packaged together to appeal to Bezos?

Past history has shown that some benefits offered to lure companies to a particular state or city have in fact exceeded the value of having them there.  Cities with fragile tax bases have sometimes given away years of tax revenues in order to attract a new business.  Some of those businesses have failed or moved when the benefit period was over.  How much to offer is a very tricky calculation to make, often driven as much by political considerations as economic ones.

One of the candidates for the Democratic nomination for Governor in Maryland in 2018, State Senator Rich Madaleno, has come up with one of the few truly creative and innovative proposals for how to attract Amazon.  Madaleno has promised, if elected, to invest $1 billion in the University of Maryland, the state’s flagship research university, to enhance its ability to be a working partner with Amazon.

I have no idea whether Bezos will take the idea seriously, but it certainly is more responsive to the logic of where he wants to take Amazon in the future than receiving a bundle of tax breaks.  There will of course be lots of other proposals with various elements that go beyond tax incentives.  The race to win the Amazon HQ2 sweepstakes looks like a once in a lifetime opportunity that should bring forth some really good ideas.  If Bezos is lucky, he will have difficulty making a choice.