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No Mercy No Malice

HQ2 and Midlife Crises

August 23, 2019

The story we were told about Amazon HQ2:

The Seattle giant has outgrown its host city and needs to open a second hub and HQ. They are a thoughtful, data-driven firm and devise a process to vet cities, including municipalities that might not traditionally be considered. Try hard and you might win — deeply American. The same thing we say to our kids about getting into college. 

The process captivates the national conversation for over a year. Like other opportunities dangled in front of low-chance candidates, the 238 proposals are narrowed to 20. Then the winners are announced. Not one winner, but two! A great idea that Amazon clearly just thought of late in the process. They’re being generous and sharing the goods. It’s obvious the firm was not planning (all along) to pull a fast one and pick two at the end to double their take. 

Twice the fun, twice the prosperity. In an enormous victory for the borough of Queens, they get it — they are one of two. An investment of $3.4 billion (not really subsidies) is offered and accepted, which isn’t even paid up front, but is a credit against future tax obligations. Win/win. 

The firm gets populist pushback from recently elected officials and special-interest groups engaged in class warfare, who blatantly misrepresent the facts and refuse to acknowledge that most Queens residents support the move. After a concerted effort to extend olive branches, the firm faces a strange form of socialist backlash and regrettably decides to pull out.

The False Narrative: Meritocracy

HQ2 is an apt metaphor for a sickness plaguing our society — the false narrative of meritocracy. It’s the notion that everyone has a shot, and if you don’t win, it’s your fault, … Phoenix. The reality is, we don’t have a meritocracy. Kids from households that earn more than $200,000/year score 250 points higher on the SAT than kids from households that earn between $40,000 and $60,000. Kids born into poverty in Salt Lake are twice as likely to escape poverty as kids born into poverty in Milwaukee. A person of color born into wealth is twice as likely as a white kid to end up poor. Our attainment of the American Dream is now largely a function of where we go to school, which is mostly a function of our parents’ wealth. 

We’d like to think we all have a shot. It’s not only less and less true (income mobility has been cut in half in the last several decades), but it’s also damaging to our collective well-being. We’ve bought into the mental trap of believing our inability to offer our kids what our parents gave us is our own fault, because we live in a meritocracy. But the reality is, Bezos was never going to roll in Columbus. HQ2 was not a contest but a con, and America is barreling toward the society our forefathers wanted to escape — a caste system. 

Sexiest Man Alive

Here’s what, in my view, happened:

  • A soon-to-be-single guy wants to spend more time in NYC and DC.
  • A contest is orchestrated to transfer wealth from municipalities to Amazon shareholders.
  • The firm does what its CEO has told them to do: Pick any two cities as long as they’re DC and NYC.

It was always DC and NYC. Jeff Bezos is 55 and the wealthiest man in the world. That means two things: he can say no to more things than anyone in the world. “The end” is gaining resolution — he might be dead or, worse, irrelevant soon. Time is going faster and faster. That awareness of the finite nature of life, coupled with options that provide the luxury of self-absorption, is the plutonium-239 of bad decisions (and sales of Porsches and Botox) — the midlife crisis. 

Any city Jeff would move to, he’d be the wealthiest man in the world. But in NYC, he’s the wealthiest man in the world and the sexiest man alive. I’m 54 and I spend undue amounts of time (i.e., any) thinking which People magazine Sexiest Man Alive I’m most like. 

Being in your early 50s, and believing you’re successful, does things to you.

Just as Gary Hart must still wonder, “Wait, what the f**k happened again?” it’s likely Jeff and Amazon were a bit befuddled as the ground shifted beneath them. When Amazon first announced the HQ2 process, AOC was a bartender. Right before the announcement, Democrats took control of the State Senate, meaning new appointments to a board that would need to bless the deal. Finally, in 2018 the worm turned. The public went from idolatry of big tech to concern to skepticism to anger in four seasons. 

It’s easy to get spoiled, even arrogant, when you’re able to skirt state tax laws. States charge most businesses if the firm has a presence in their state, as you’re using, you know, their roads and sh*t. But Amazon is special. Their warehouses and data centers are not really a “presence” and they don’t pay taxes. To be fair, it’s the states not having the backbone to say no to this BS that’s a big part of the problem. If my parents had given me cocaine and a Range Rover at 16, I’d have said, Yes, thank you. 

But this time, Amazon’s army of corporate communications execs were having trouble controlling the narrative. They didn’t feel the need to do their homework and gauge the resentment among local officials, whom the governor and mayor sequestered and ran roughshod over. Also, taking a strong “We’re Amazon, we’ll just say no to that whole union thing” stance in a region with one of the greatest proportions of union households (Queens) might, you know, piss them off. 

Freaked out about discussions of unionization and a shocking lack of appreciation for all things Amazon, Jeff wants to send a signal and pulls out. He’s the most impressive businessman in history. He has just finished his seventh cycle of creatine and can bench double his weight. He’s not going to take sh*t from media bullies or civic gadflies. Jeff takes his ball, loyalty programs, and HQ2 (A or B), and goes home. 

Or so we thought. But here’s the rub.

Amazon HQ2 is NYC. Six months after “pulling out,” the company has 860 job listings in NYC. That’s 4x what Google and Apple have posted. Google — having just purchased 325,000 sq ft in the Meatpacking District for $600 million — has a fraction of the hiring mojo of the firm that supposedly packed up and left six months ago. Since, again, “pulling out” Amazon has 1,577 new hires (1,033 at Amazon and 544 at AWS). In exchange for over $3 billion in tax breaks/subsidies, Amazon had dangled 25,000 jobs over 15 years. At this point, Amazon is on pace to beat that. Coincidentally, Jeff plunked down a cool $80 million for a Madison Square Park man cave — hello, ladies. Or, alive girl.

Two Words: Grass and Roots

This is a rare victory for grassroots movements, arresting, in its tracks, the invasive species of big tech. NYC got the great taste (jobs) with no calories (subsidies). It’s difficult to fully appreciate how incompetent this renders the mayor and governor, who have proven themselves to be the worst poker players in history — we didn’t need to give Amazon a damn cent. 

The greatest concentration of culture, grit, creativity, and higher learning ever assembled doesn’t need to give a handout to the wealthiest man in the world. He and most other people blessed with an extraordinary universe of options (the world) choose NYC and pay, vs. charge, to be here. For Mayor De Blasio this reflects an exceptional lack of understanding of his constituents and a general lack of self-awareness. The kind of deficit that leads to truly arrogant, ridiculous decisions. Like, I don’t know, running for president. 

State Senator Michael Gianaris, who was excoriated by cronyists posing as capitalists (Cuomo, de Blasio, CNBC) demonstrated what we want in an elected official — the vision and courage to take heat in exchange for preventing a tragedy of the commons. In this case, a waste of $3 billion of taxpayer revenues that can now be disbursed to schools, housing, and subway projects. 

It Gets Better

Amazon’s move to NYC is in fact being subsidized. By SoftBank. Amazon is in talks to put thousands of its new hires in the Lord & Taylor building, recently purchased by WeWork (neat concept, but a touch overvalued). As WeWork loses a dollar for every dollar of revenue, it’s not irrational to project that SoftBank limited partners are spending tens of millions to fund the mother of all midlife crises. God, that feels good.

Back to State Senator Gianaris. When he’s older, he can tell his grandkids about the time he saved NYC and the state $3 billion dollars. They will find the story boring. He should tell it anyway. Senator Gianaris stood up and said “Enough.” When do we?

Life is so rich,

P.S. I’m back on YouTube talking about Juul this week.

14 comments

  1. Tim says:

    Absolutely brilliant! (by the way, I think you meant disbursed, not dispersed)

  2. Max says:

    Scott – So National Landing (NoVa) folks are a bunch of swampy ass-clowns?

  3. Punya Upadhyaya says:

    Scott – love the bright analysis – linking the lack of meritocracy with the stunting of social mobility is a good point (pulling together scattered thoughts on superstar economies and firms, urbanisation, and poverty). I am amused by the take on midlife crisis – assuming this is partly tongue in cheek even if some readers dont get humor! Will look forward to future hiring numbers to see how this plays out over time – but the start is good. Want to commend your mix of data, insight and humor…

  4. Jason says:

    Scott – you’re becoming incredibly ego driven in your writing and speaking. Spending time with Kara Swisher is making this worse as she is the exact same. You are living in your elite bubbles and never have to actually listen to anyone who offers a different view. No, putting 800 jobs into NYC does not make it HQ2. Obviously you can fact check your own blustery statements. Obvious 800 jobs are nothing close to 25,000 and building housing, and supporting academic programs and the community infrastructure that was planned in the original proposal.if you want to be the equivalent of MSNBC and tell us “facts” that are not facts, then you are quickly losing credibility. Still a good writer and dumb people that don’t think and are impressed by your cute writing may miss the false analogies and false comparisons, but most of us with brains see through them transparently. Please….return to your old analytic self. All this narcissistic projection and self loathing and poor logic is damaging your reputation.

  5. Jim says:

    NYC is not a company town. We do not need and do not want to be a pawn for one giant corporation. The idea that the future requires us to beg Amazon to come here is a joke. We DARE Amazon to come here. When they do, they will see the future.We are a city of thousands of creative , energetic risk takers. Maybe Queens doesn’t get it, but take a run down the BQE to Brooklyn, where we are kicking ass! Whining about losing Amazon is so Cleveland.

    • Jason says:

      Generally people in NYC think the world revolves around them. Your tech scene is very 3rd rate lets be honest. The tech scene in Silicon Valley, Seattle, Los Angeles and Austin is objectively light years ahead of NYC. NYC is old school media companies and finance. Everything else innovative is out here on the west coast. #truth

    • Ali says:

      @Jason Generally, people in Silicon Valley think the same thing. There is a reason why Amazon is coming to NY and that is because of the large population of education work force. Those tech giants will inevitable need to diversify and NYC is great place on the East coast besides Boston to do so

  6. Brian Benstoclk says:

    Come on Professor Galloway. I don’t believe for a second think that passing on the Amazon deal was a good deal for the citizens of Queens. Correction, they didn’t pass on it, they blew an already negotiated transaction. This is perhaps the biggest governmental blunder in the history of the borough (except for losing the Jets to NJ). OAC and Gianaris get an “A” for grandstanding and a big fat “F” for the outcome they miraculously achieved. As you look out the window of your penthouse towards Queens (I don’t actually think that you live in a penthouse) I want you to look at all of the new, empty, apartment buildings in Long Island City. Those 25,000 jobs and the families that they would bring with them sure could have helped this community as we edge ever closer to a recession. Ken Langone’s’ new book “I Love Capitalism” is a good read (your new book is a winner too) and a solid reminder that rarely is capitalism a zero-sum game. Both sides of any transaction should get something out of the deal. In this case, Queens lost and AOC got a lot of publicity. That’s a pretty shi*ty exchange.

    • Bob says:

      Did we read the same post?

    • David says:

      @Bob I don’t think he read the post, he came with a talking point and that’s all.

    • Jason says:

      You are 100% spot on. Scott is very verbally nimble. He keeps repeating these very very strong statements but has presented ZERO evidence that Amazon had decided the city ahead of time. He has been talking about this on his podcast for the last year over and over…but without evidence. Did Jeff Bezos buy this because he happened to own a house nearby and that was the main factor? C’mon…you’re a very smart person but this is an obviously IDIOTIC idea you have convinced yourself of. Very poor logic. The world’s richest man can buy whatever house he wants and live where he wants..

    • Jim says:

      @Jason The evidence is where they ended up, even with the absurd proposals from the also ran cities. In the case of jobs “lost”, you are confusing absolute numbers with rate. Try re-reading. As for Silicon Valley, life in a shopping mall is not a creative environment, which is why you only come up with re-tread ideas.

    • Eric says:

      @Jason C’mon, you really can’t believe what you wrote or work in Amazon PR.

    • Dan says:

      Oh won’t somebody please think of the plight of the Long Island City condo developers and how they suffer!