Learning from Amazon’s HQ2 Horse Race

Trying to guess which city Amazon will pick for its “second headquarters” is kind of futile, but I can’t resist. Nor, it seems, can every North American mayor resist throwing their city’s name into the hat.

A lot of people will get their hopes up. That’s fine. It’s a chance to learn and improve the odds of attracting (and/or retaining) more realistic opportunities in the future. As an observer it’s also an opportunity to think about how our urban and suburban environments are changing.

Importantly, Amazon has a knack for anticipating what’s coming and doing things their own way. And they’re ruthlessly pragmatic. They’re not the type of tech company to go in for vanity projects or promote utopian ideals. Their selection will probably influence what other companies will look for and how cities will try to attract them for years to come. (And it won’t be which mayor has the most polished platitudes or pitch deck.)

Hopefully the whole thing doesn’t make cities and governments even more acquiescent to corporate whims and demands, especially the more short-sighted, opportunistic ones.

What We Can Learn

Brookings Institution’s Richard Shearer (ht Brian Kelcey) has a good argument why the proposal process for a lot of cities will mostly be a waste of time. Maybe I’m optimistic but I’m hoping it doesn’t have to be a total waste of time.

Some people are already trying to take lessons from the HQ2 RFP — or at least capitalize on it as a way to promote their existing ideas — e.g. “shoulda voted for transit,” etc. It’s largely speculation at this point as to how much emphasis Amazon ends up putting on things. Even after the decision it will probably be dangerous to read too much into it. Amazon is, after all, a unique company, and this is a unique project, but it does make for some potentially fruitful thought experiments and “what if” discussions.

A more realistic scenario would be, what if Amazon (or any big tech company) hired someone in our city who wanted to stay? What if Amazon bought a startup in town? Would Amazon have reasons to continue to invest and hire more people? Would they have reasons to turn it into a major centre devoted to some specific aspect of the business, like robotics research, logistics, media production, customer service? These are the types of opportunities that are probably sitting under our noses more often than we realize.

Let’s not let the circus distract us. If I were a long-shot I’d want my city to approach the HQ2 contest with the goal of ongoing, incremental investment—building on the reasons that companies like Amazon have already set up shop (even satellite offices), continuing to draw other employers looking for the same kind of skills and talent.

Where’s Amazon Now?

There are Amazon development offices in well over a dozen North American cities (not including fulfillment/shipping centres and data centres). I figure if Amazon hasn’t already had a reason to stick a few hundred software developers somewhere they’re unlikely to find it much more attractive for tens of thousands (but who knows).

It’s also worth noting how Amazon used the word “stable” in their RFP. “Stable and business-friendly environment.” “Stable business climate.” What could be more stable than a known entity?

Apart from its current head office (“HQ1”?) in Seattle, Amazon has software development offices in most of the usual tech/business hubs: the Bay Area, Southern California, New York, Toronto, Boston/Cambridge, and Austin. Any of those cities would meet the basic criteria for HQ2 and could conceivably be contenders, though I suspect there’s not enough elbow room in California or New York, so I’d only look at Toronto, Boston/Cambridge, and Austin.

Other large cities like Chicago, Dallas, and Atlanta have Amazon offices but zero/few job postings for software developers. Maybe they’re in the running, but I think people are putting more emphasis on the airport requirement than Amazon will. Most major metropolitan areas in North America have an airport that’s adequate for Amazon’s needs. I can’t imagine Atlanta jumping ahead of Toronto, for example, based on the fact that ATL is the busiest or 2nd busiest airport in the world and YYZ is “only” the 16th busiest.

More interesting to me are Pittsburgh, Minneapolis, Detroit, and Herndon, VA—all places where Amazon already has software development offices.

Pittsburgh is a natural satellite office. It has attracted a lot of tech companies recently thanks to the computer science and engineering talent coming from top-ranked programs there. The city has also been accommodating to tech companies (maybe a little too accommodating, as in the case of Uber). But Pittsburgh is a little smallish and relatively isolated (compared to, say, Philly, DC, Baltimore, Boston, etc.).

Minneapolis might seem even more unusual than Pittsburgh, but Amazon is a retailer and Minneapolis-St. Paul is also the home of Target and Best Buy (and less relevantly, 3M and General Mills). Perhaps most notably, it’s also the home of C. H. Robertson, a Fortune 500 logistics company that Amazon does a lot of business with. But like Pittsburgh, Minneapolis may be on the small side and even more isolated. If Amazon wanted another northern outpost I’d expect them to go further east and maybe even across the border.

Detroit is slightly larger and arguably more connected than Pittsburgh or Minneapolis but like them is a bit of an outpost. The most interesting thing Detroit has going for it is the space available to work with. It’ll depend on how much Amazon ends up emphasizing “think big and creatively when considering real estate options” and how interested Amazon is in company town-building.

Herndon (in Fairfax County) is a bit of an oddball in this group but it meets the basic requirements in the RFP. It’s a suburb of Washington, DC (Richard Florida’s early pick to win), close to Dulles Airport. They also seem to have been fairly accommodating to Amazon in the recent past, in terms of tax incentives and infrastructure upgrades. Fairfax County is a good reminder not to overlook the suburbs and get too fixated on the major urban centres as options.

Amazon has offices in a few other places too, like Phoenix and Vancouver. I know little about Phoenix except that it’s warm and dry (unlike Seattle) and has a lot of space around it for growth. Maybe it’s an option. Vancouver seems too close to Seattle, but who knows.

Last Thought: North American Politics?

Toronto is a great choice on paper and a lot of people’s shortlist contender (I like GeekWire’s initial take). Toronto meets all of the basic requirements in spades. But a successful bid will depend not just on the site(s) and the incentives in the proposal, and probably on politics.

It’s a safe bet that Donald Trump will have very strong, very public opinions about the possibility of $5 billion and 50,000 jobs going to Canada. And he has already expressed hostility to Amazon and Jeff Bezos. He has also helped throw buckets of money at companies to stay in the US. So it’s possible that the RFP’s openness to Canada (and presumably Mexico) is largely for bargaining leverage—a way to maximize incentives from all three levels of government and make Trump behave nicely. It could also be political leverage. Bezos could say, “if you want these jobs to stay in the US then we need skilled immigrants, we need DACA, we need visas, we need employees to not be afraid of getting back into the country,” etc.

Of course it’s also possible that Toronto is already on Amazon’s list as a top 2 or 3 pick from the start, and any potential political sideshow is just coincidental. Though as I write this I’m revisiting the notion of “stable business climate” in international terms…