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What Amazon got wrong about New York City

In November, on the day Amazon announced the winners of its contest for a second headquarters, I sugg
February 14 · Issue #290 · View online
The Interface
In November, on the day Amazon announced the winners of its contest for a second headquarters, I suggested that the company had fatally misunderstood the current relationship between tech giants and public opinion:
It’s hard not to feel today as if the company misread the room — overestimating the public’s appetite for a billion-dollar giveaway to one of the world’s biggest companies, and underestimating the public’s ability to raise hell on- and offline. Amazon may yet feel that pain, in the long run. 
Today, the long run arrived. In a move that had been foreshadowed by an earlier report in the Jeff Bezos-owned Washington Post, Amazon said today that it would abandon its plans for a New York regional office. Public sentiment had, indeed, killed the deal:
“After much thought and deliberation, we’ve decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens,” Amazon wrote in a statement this morning. Amazon said it is canceling the plans because a “number of state and local politicians have made it clear that they oppose our presence.”
The plans for Amazon to move into Queens were largely hashed out in secret, without input from local lawmakers. There was immediate backlash after the deal was announced, in part because of the major concessions that New York agreed to give Amazon to entice the company to move in. That included up to $1.5 billion in incentives in exchange for creating 25,000 jobs. Amazon had promised $2.5 billion in investment.
On some level, I understand Amazon’s approach to urban dealmaking. I covered economic development at the state and city level for the first eight years of my career, where I saw my share of lucrative corporate incentives offered up in the name of jobs. Until very recently — possibly until this deal — it has been possible for corporations get handouts simply for dangling the promise of new hires to politicians eager to burnish their reputations as job creators. (Ask the nice folks over in Racine, WI.)
Economic issues often dominate state and local campaigns, of course, and everyone wants to stand in front of the new headquarters when the ribbon is cut and the flashbulbs go off. But Amazon’s aborted effort to build in NYC shows that a simple promise of jobs is no longer sufficient to win public support — and in some ways, it may be counter-productive.
One big reason is that the economy is fracturing into two: with a small group of well educated professionals, who enjoy good jobs with rising wages; and a much lower-paid group of service-industry workers who take care of them. As Eduardo Porter wrote in the New York Times earlier this month:
There is a small island of highly educated professionals making good wages at corporations like Intel or Boeing, which reap hundreds of thousands of dollars in profit per employee. That island sits in the middle of a sea of less educated workers who are stuck at businesses like hotels, restaurants and nursing homes that generate much smaller profits per employee and stay viable primarily by keeping wages low.
Even economists are reassessing their belief that technological progress lifts all boats, and are beginning to worry about the new configuration of work.
Porter lays the blame for this bifurcation at the feet of automation — an area in which Amazon, of course, is an industry leader.
For an anxious public, then, a promise of 25,000 new jobs sounds much different in 2019 than it would have in 2009. If you’re among the sea of hotel and restaurant workers that Porter describes, you know you’re likely never going to be qualified for one of the jobs that Amazon is creating in your backyard. Even if the company belatedly promised a job retraining programs for workers with fewer skills.
Moreover, if you have paid attention to the experience of other global tech capitals, most notably my home of San Francisco, you know that the arrival of high-paying jobs is typically accompanied by an extraordinary rise in rents. The rising cost of living can push homeownership even further out of reach for most workers, and may ultimately send even highly paid workers packing to the exurbs.
It’s only natural that Amazon saw its promise to create 25,000 jobs as a blessing, for creating jobs is most of what we have ever asked of American companies. But given the realities of our economy — an economy that Amazon is relentlessly and ruthlessly transforming according to its narrow self-interest — it’s also only natural that many New Yorkers wanted nothing to do with it.
Of course, the company might have realized all this sooner, had it not pursued its deal in near-total absence of public input or scrutiny. The company’s insistence that its multibillion-dollar giveaway be negotiated in secrecy insulated it from the criticisms that went viral the instant it was revealed — which illustrates how self-defeating the company’s strategy was in the first the place.
If our other tech giants take one lesson from Amazon’s aborted attempt to build a heavily subsidized regional office, I hope it’s this one: that the more secrecy you demand in negotiating with the public sector, the more risk of catastrophe you bring upon yourself.
In any case, the collapse of HQ2 in New York — its counterpart regional office project continues apace in Virginia — represents a small win for our democracy in the face of rapidly concentrating corporate power. Amazon said that it would still hire the 25,000 new people it planned to bring to New York, but would instead spread them across 17 regional hubs in the United States and Canada.
That farther Amazon spreads its bounty, the more easily each municipality can absorb the new jobs. A nationwide program of high-paying tech jobs means a secondary nationwide program of lower-paid but still meaningful service-industry jobs, distributed in more cities that could use them. And the country will get all of this without pledging billions of dollars to a company that barely pretends to need the money.
It’s worth noting that public opinion polls showed solid support for the Amazon boondoggle, and that some industry groups in New York are in public mourning over the company’s scuttled plans. My colleague Natt Garun reports:
The decision to leave New York has been disappointing for local tech leaders like Julie Samuels, who runs Tech:NYC, a nonprofit that helps grow tech companies in the city. “This is terrible for New York. You’re talking about tens of thousands of jobs that were going to be in New York City that now aren’t,” Samuels says.
Tech:NYC currently has more than 700 companies in its coalition, including Etsy and General Assembly. General Assembly CEO Jake Schwartz today tweeted that Amazon’s departure was a “facepalm heard around the world,” and a “self-own by the entire NYC ecosystem.”
One, I’m not sure that Amazon won’t eventually bring thousands of jobs to New York anyway. The company has existing offices in the city; surely they will expand along with Amazon’s ambitions. Monopolies are extremely reliable in this way!
Two, to the extent that any facepalming is being done, let’s keep in mind that absolutely none of this had to play out in the fashion it did. The world had changed, and Amazon executives — famous for their “Day 1” mentality — failed to change with it. The self-own is entirely theirs.

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5:45 PM - 13 Feb 2019
And finally ...
Welcome back, Darth.
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