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Amazon New Headquarters: What It Means

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Disrupting The Ecosystem

With Amazons recent announcement that it plans to open a second headquarters in a city, as yet unnamed, threatens to disrupt the civic ecosystem. The search promises to be as frenzied as choosing the host city for the next Olympics; but on steroids. We are talking about $5 billion in Amazon investment and 50,000 new jobs.

With that much money, you can envision the political hustle that will soon be taking place. To no surprise, someone has already come up with a Top 10 list of probable winning cities. Already these experts have anointed the city of Denver the winner.

Each of these handicapping efforts is flawed in their approach by suggesting; much like the Olympic bidding process, there will be only one winner but many losers. Nothing could be further from reality. Here are some of the winners.

When the final decision is announced Jeff Bezos is going to make lots of enemies but while the process is going on the Amazon leader is providing hope to residents in 10-20 cities containing at least 20 million people.

Real Estate Agents Are Stoked

No matter which city gets the trophy, real estate agents everywhere will benefit. What better strategy for closing a sale then: “ it best you decide now because once Amazon moves into the area, prices are going to go sky high”.

Infrastructure Needs Will Impact The Location

Companies like Amazon in the Seattle area as well as Silicon Valley bring much good to their communities. The unplanned explosive growth of technology, however, has created it own set of social problems. One of the biggest is the absence of an infrastructure that includes high-speed mass transportation.

It is a good bet that team Bezos has infrastructure as a major item on their list. This is really just the beginning. How long is this list and how much will Amazon demand for any city to pay for these features? Amazon holds huge leverage and they will exercise that power to their full advantage.

If professional sports owners can build billion dollar stadiums using public financing and then taxing residents to pay for the bond interest, why should we think that Amazon wouldn’t do the same?

Amazon has demonstrated they are not out to maximize short-term profits. Nevertheless, management has a board of directors and shareholders to answer to. So for the winning city, the real estate agents and building contractors will rejoice, but what about the rest?

If Amazon chooses to extract maximum financial concessions in its negotiations, that immediately eliminates certain disaster locations that might otherwise be natural candidates; places like Detroit and Chicago.

Denver: Hip Slick and Cool

Odds makers in the Amazon sweepstakes have performed their analysis using criteria like: the indigenous supply of tech, science and professional service industry workers. What that translates into is a place that young people consider hip, slick and a cool place to live; a place with at least one Whole Foods and lots of kale. So far the betting is on Denver. Agreed: Denver fits the hip, slick and cool definition perfectly.

Who Is Next

But to stop there would be to ignore one of the more likely reasons behind Amazon’s decision, economics. The traditional centers for tech and science development have become islands much like Manhattan was for financial services.

The cost of attracting and retaining employees has gotten out of hand. Moving tech jobs to lower cost areas is no different then US manufacturers moving jobs offshore. It’s basic economics.

What Amazon is doing is opening the door for other big corporations in Silicon Valley to consider taking similar steps. In the end CEO’s behave like lemmings just like everyone else.

This may not save civic disasters like Detroit or Flint but for places like Austin, and cities like Raleigh it means a lot. Kudos to Amazon for leading the way to disrupting it’s own ecosystem.