Apparently, Amazon’s new headquarters is expected to house something on the order of 50,000 people. Which is a lot, really. Enough that it will have a massively distorting impact on the entire regional economy. The Seattle area is already reaching a breaking point, complete with massively escalating housing prices, transportation problems, local cultural backlash, and more.
It appears that Amazon is hoping to gain a big win in the form of tax breaks and infrastructure promises from the city that they select. They are getting a lot of press for a very public decision making process, in what can only be described as a race to the bottom for the “winner.” The “winner” will undoubtedly be the one that offers the most services at the least cost (to Amazon).
It’s a really, really strange strategy for Amazon. Nineteen out of twenty cities will wind up pissed, and the “winner” will be a completely different city in a decade (c.f. Seattle). It’s hard to imagine anyone being pleased with the results — Amazon, the old residents, or the new ones. The luckiest will be those that already own property in the “winning” city — it’s as close to winning the property lottery a homeowner can imagine.
Virtually every article covering Amazon’s HQ2 decision is also taking time (like this article) to highlight all of the problems that come with a) a new Amazon HQ and b) Amazon’s challenges as an employer in general. This is… not ideal for Amazon.
The really strange part is that this would all be very easily mitigated by Amazon deciding to open up smaller offices in other areas. For example, Amazon might instead decide to open up ten regional offices all over the US, each with 5,000 employees. Those offices would represent major, major investments for each of those cities, but without the massively distorting effects of a huge 50,000 office.
For example, the real estate prices around that new 50,000 office are going to shoot up the day the deal is announced, and keep going up as the office park is built. Amazon (and all the other local employers) will have to keep raising salaries to match. A new office of 5,000, in, say, Sacramento would allow Amazon to hire engineers and pay them local salaries instead. A new office of 50,000 would change the face of Sacramento, driving up wages and property values.
What about the advantages of scale? Well… that’s a bit ambiguous. You can’t actually manage 50,000 (or even 5,000) people in a direct manner. Amazon famously sticks by the “two pizza” model for teams. They already have models for teams in other geographies. There is some advantage in being close by, but on the other hand, 50,000 people aren’t having pizza together either.
More importantly, I think that Amazon is completely mis-playing the politics. Once the deal is done, the political leverage is over — Amazon is going to be stuck with HQ2 for a long, long time. If Amazon spread out the offices, they could have a huge impact on the local governments of every region, while still retaining political leverage in the long term. “If you don’t play ball, we will shut this office down and move to another city” is a lot easier to say if you have nine other cities up and running that could take over.
Oh, and one other problem with HQ2 — who exactly is in charge? The original HQ? Or the new, shiny HQ2? Where will JeffB live? Who, exactly, is going to want to work at HQ2 instead of HQ1, assuming the HQ1 team is still the leadership? Or is the new shiny HQ2 the new leadership location? With smaller regional offices, it’s still clear who is leading. It’s a much more straight-forward decision making process — work at a regional office, maybe get a little less cash, a little less responsibility, and be able to afford a house. Ambitious? Figure on moving to Seattle someday.
It’s not too late — Amazon could decide to switch to this regional HQ model at any time before making a final announcement. For the sake of everyone involved — the hypothetical new “winner,” for a more balanced American economy, for the nineteen “losers” — let’s hope they come to their senses.
It would be an easy out — “We loved all of the participants, we couldn’t choose just one.”
* Oh, one more idea. Amazon could invest in a nice high speed rail line and open offices north, south, and east of downtown Seattle. Fraction of the cost of an entirely new city. Just an idea.