HQ 451February 17, 2019
In Ray Bradbury’s classic Fahrenheit 451, the protagonist, Montag, rebels against a dystopian society where books are burned. On Thursday, with Long Island City’s refusal to kiss a billionaire’s hand, State Senator Michael Gianaris became my Montag. While AOC and Elizabeth Warren jonesed for the mic, it was Mr. Gianaris who is the real Montag. I registered joy (yes, joy) at the greatest city in the world telling Jeff Bezos to return his hand back into the deepest pocket in the world, his own.
However, my joy was put on pause as a ton of people I respect, ranging from Andrew Ross Sorkin (#dreamy) and Henry Blodget (#smart) to Stephanie Ruhle (#awesome), immediately took to the airwaves to lament the decision as, at best, irrational and, at worst, evidence of NYC creeping toward socialism. I’m sticking with this being a sign that immunities are beginning to kick in against the dystopia of a billionaire with his hand out under cloud cover of commentators calling him a hero. I also reject the notion that to refuse subsidies for the most valuable firm in the world is socialism.
CNBC kicked off coverage with the hosts in violent agreement that this was a travesty for NYC: “What message does this send to businesses and CEOs who want to bring jobs to NYC?”
I don’t know, CNBC, maybe NYC is saying to businesses that if they want to HQ in the greatest density of opportunity and talent ever assembled, they need to pay their damn taxes, like the rest of us.
It’s not surprising CNBC has decided, as an organization, to rail against this crime against humanity. The average age of a CNBC viewer is 67, and most pieces of content on CNBC end in a buy/sell recommendation on a stock. So, their core constituency is a retired guy who owns Amazon stock and (85%+ chance) doesn’t live in NYC. Their viewer is rooting for the transfer of wealth from Queens to Amazon shareholders. CNBC positions it as a $3B investment to get $27B in tax revenues over the long term. If this sounds like suspicious/fuzzy math, trust your instincts.
What Is Socialism?
Capitalism is a system where the means of production are owned by private individuals with the government enforcing laws and regulations to ensure a level playing field. On the other hand, in socialism the means of production and the distribution of the spoils are owned and controlled by the state. CNBC and others horrified by the hard pass on the subsidization of the wealthiest man in the world wrap themselves in the flag of capitalism to disguise a hybrid between the two. When Governor Cuomo redistributes, with little oversight, income from every other business to Amazon, the government is picking winners and losers and inching toward the economic system they claim to be fearless warriors against — socialism.
Are We the Idiots?
At what point does Google, who is investing $1B in Hudson Square and doubling the number of jobs in NYC to 14,000, put their hand out? If being a responsible corporate citizen means paying taxes twice (not getting subsidies), then at some point the Google board, as fiduciaries for shareholders, asks management, “Are we the idiots?” Btw, Apple and Facebook have kept their hands in their pockets, as have Adobe, HP, Broadcom, and Roku in San Jose. None of them have asked for subsidies.
In 2010 I founded L2. I paid $15,000/month for a 3,000-sq-ft office with mice and $10,000/month for an 1,100-sq-ft apartment. Two years later we were denied, by seven different schools, the opportunity to spend $58,000/year so my son could play with blocks (Pre-K). Why did we tolerate this? So we could be 7 minutes from Coach, Estée Lauder, and Ralph Lauren, and surrounded by 8.6M people who all decided to reach beyond their grasp.
Since then, we have (conservatively) created 150 high-paying jobs in NYC. By Governor Cuomo’s math, it would be an enormous win for the city to give L2 $18M in subsidies. I was a large shareholder, so I think we should cut out the middleman and have NYC taxpayers send me a check for $9M. The government sending a 54-year-old white guy a check feels unseemly, so we need a stadium or CNBC asking what it means if “New York can’t hold on to small businesses, which create two-thirds of jobs in America” as fabric softener.
Not to worry, Governor, I have a plan.
Or put another way: “Governor Cuomo, where’s my helipad?” I know Andy (Ross Sorkin) and the protectors of capitalism at CNBC feel me.
In 2014 my family and I moved from NYC to Florida. There were several reasons, including we couldn’t afford New York. Specifically, we couldn’t afford to live the life we wanted to live in NYC (see above: $58,000/year to play with blocks). And that’s ok. No person or firm has a birthright to live in NYC. It’s expensive here, for a reason. America’s challenge is not to make NYC or San Francisco more affordable, but Detroit and St. Louis more expensive. The greatest density of creativity, capital, and grit ever assembled goes at a premium. The Birkin bag of metros defines the term aspirational as most people and firms don’t get to live/HQ here.
CNBC’s argument, as I understand it, is that it’s still a good thing if Hermès sells a bunch of Birkins for $8,000, instead of $12,000, as they only cost $4,000 to make (they would still make money). There will be the Amazon of all trickle-down effects in the NYC metro … However, great brands led by great operators have one thing in common: they invest vs. discount. The governor and mayor’s job is not to make NYC less expensive, but to make the city worth it.
Invest in infrastructure and quality of life, including addressing the subway and the escalating homeless problem. Detroit needs to discount; Hermès and NYC need to continue to invest. The gangster move here was the leadership demonstrated by Mayor Bloomberg, who brought a third world-class university to Manhattan. Every firm over next several decades that breaches $100B in value will have their HQ within a bike ride of a world-class university. But that’s another post.
The best distillation of why NYC broke up with Amazon was ironically articulated by Jeff Bezos when describing a different sort of blackmail: “If in my position I can’t stand up to this kind of extortion, how many people can?” Maybe the greatest city in the world was inspired by Mr. Bezos’s actions and decided if NYC can’t stand up to Amazon, who can? Initially, NYC will be criticized and judged, but people’s disdain will shift as they start to see NYC as a hero for turning around and kicking our idolatry of innovators in the balls.
Life is so rich,