Metropolis

Amazon Did Exactly What Every Company Does. What Was the Point?

The Amazon arrow spread over a diptych of Crystal City, Virginia, and Long Island City, New York.
Photo illustration by Slate. Photos by Getty Images Plus.

The New York Times reported late Monday that Amazon has closed in on two locations to end its HQ2 search: the Crystal City neighborhood in Arlington, Virginia, and Long Island City, New York. The first is across a river from Washington, D.C.; the second across a river from midtown Manhattan.

They are, in short, exactly where you would expect a West Coast company to open up satellite offices for a new white-collar workforce. Not only are they adjacent to the country’s capitals of government and finance. Not only do they represent the largest (labor force 10.2 million) and sixth largest (labor force 3.4 million) metros in the United States. Not only are D.C. and New York the sites of two of Amazon CEO Jeff Bezos’ homes—always a good sign of corporate intentions. They are also already home to the largest concentrations of Amazon workers outside of Seattle.

But the decision is somehow even more mundane in light of the circus that preceded it. As BuzzFeed’s Tom Gara observed, it’s a bit like that time the New York Times convinced 13,000 people to apply for its “world traveler” listing, then hired a respected New York magazine writer. Or when LeBron James captivated the nation for an hourlong network special to announce he would play basketball in Miami, where he won back-to-back championships. Amazon is taking its talents to D.C. and New York; we needed a yearlong reality show for that?

The HQ2 competition drew so much oxygen for two reasons. The first was the scale of the offer: Fifty-thousand jobs and 8 million square feet in one place was the rare private investment that could actually change the trajectory of a city or region. The second was the apparent openness: Anyone could compete, and hundreds of places did.

If the Times report is correct, then neither of those expectations will have turned out to be accurate. On the latter count, it was fun to fantasize that Bezos might choose to revitalize some depopulated Rust Belt city or simply move the whole shop to Jackson, Wyoming, and elect a pair of Amazon senators. Amazon didn’t need to open its new branch in a city with 50,000 wannabe employees. But it did need to go to a place that those future employees’ spouses, in all likelihood as ambitious as their partners, would be excited to move. That limited the pool—apparently so much so that the former point fell through as well, and Amazon opted to split the big bonanza in half.

So, if Amazon’s plan all along was to open larger branch offices in two major East Coast cities, why did it send hundreds of local officials scrambling to submit plans?

First, the search committee may have wanted to set the company up in a lower-cost location than Seattle, which has some of the country’s highest housing costs and concurrently demands high wages. It’s possible the firm faced resistance either from executives who didn’t want to move, or from HR who realized it might challenge the company’s hiring goals. In 2002, Goldman Sachs faced a “near-revolt” when it tried to move its equity traders from Manhattan to New Jersey. (“It’s not exactly Paris with the left bank and the right bank,” a company executive said of the Hudson River at the time.) Amazon’s Seattle workforce might feel similarly about moving to Columbus, Ohio.

In either case, it’s likely that the company knew it wasn’t establishing some back office, but moving to one or more high-cost cities, and wanted to extract the maximum possible subsidy from its chosen location. No doubt New York and Virginia—with competitors hot on their heels—have floated much more generous tax-abatement offers than they would to the local hardware store. (New York Gov. Andrew Cuomo offered to rename himself Amazon Cuomo.) In New York, the company has apparently chosen a neighborhood blanketed in federal “opportunity zones,” increasing the likelihood of a primo-low-tax expansion in a city that ought to be capturing every dollar from companies eager to have access to its labor market, infrastructure, and amenities, not paying them to set up shop.

It’s also possible Amazon—which has turned mighty Seattle into a company town—came to the conclusion that it wasn’t necessarily better to be in such a dominant local position. Told that the company would be splitting its expansion between two cities, Seattle Mayor Jenny Durkan said, “I’d call those branch offices. That would be good news.” She meant that’s good news for Seattle, which retains its pre-eminence as the company’s real headquarters.

It might also be good news for Amazon, which won’t exert such a commanding influence in the local labor market that it single-handedly drives up wages or jacks up housing prices. It won’t find itself with the corporate responsibility that might have come with a more ambitious site choice.

It might also be good for the cities: The impact of 50,000 new employees was always going to be a shock, and few cities are better built to handle it than New York and Washington. (It would be hard to think of two locations with less potential impact on traffic, for example.) Yet to the extent possible with such a big expansion, the company won’t be the singularly influential corporate presence it is in Seattle, where Amazon recently helped quash a head tax to fund homeless services.

In any case, the search was its own reward. Mayors and governors bowed down, and a burst of media speculation kept Amazon on our minds. But that wasn’t all. As Stacy Mitchell of the Institute of Self-Reliance observed on Tuesday, the 238 applicants for HQ2 turned over a lot of information. Those applications make up a library of primo sites. Most important might be evidence of each place’s willingness to change laws and regulations to court Amazon. The company has already gotten $1.6 billion in giveaways, according to Good Jobs First, which tracks and advocates against corporate subsidies. So it’s no strange to the practice. But a little more insight never hurt.