Amazon has announced it will split HQ2 into two parts, which we might call HQ2.5-A and HQ2.5-B, creating what I think may be an oxymoron and a half. 2.5-A will go to the borough of Queens in New York City and its half-sister to Arlington, Virginia.
In both places, Amazon says it was looking for rich, deep talent pools. According to every commentary I have been able to find since the announcement, everyone agrees that those two places offer just such pools. So that’s good for Amazon and good for the places.
But I see Amazon about to plunk itself down into the middle of something else as well. New York and Washington may be the only two places in the country, with the possible exception of Chicago, with the grassroots political infrastructure and the social cultural heft to be able to tell Amazon to shut up and sit down once in a while.
Amazon is a huge, scary gorilla, and like all huge, scary gorillas it can behave very badly if allowed to roam free in the community. In yesterday’s New York Times, architecture critic Michael Kimmelman told a story I had not heard before: In Seattle, Amazon objected to a proposed tax to help pay for homeless services. Amazon threatened to halt construction on a new office tower if Seattle didn’t drop the idea. So Seattle dropped the idea.
Think about that. An entire community decides in its wisdom and good conscience that it needs to do something about its homeless crisis. But the huge, scary gorilla starts shaking the trees, and the entire community quakes in its boots and backs down.
You know what? That’s what zoos are for. And Queens and the Washington suburbs just might be big enough zoos for Amazon.
New York and Washington may be the only two places in the country with the grassroots political infrastructure to be able to tell Amazon to shut up and sit down once in a while.
Us? Dallas? No way. Good God. The entire city, the whole place, each and every one of us would have looked to Amazon like so many ripe bananas.
Some people here knew that. When Dallas City Council member Philip Kingston heard we weren’t getting any of Amazon’s fractionalized headquarters, his reaction was “Whew!” As in, close call!
When I talk about the kind of political infrastructure that can stand up to an Amazon, I do not mean the presence of the federal government in Washington or the proximity to Queens of New York City Hall. I’m talking way further out in the field and down in the weeds than that — the people. People who are around a lot of big shots tend to take big shots with a grain of salt, maybe because the presence of so many big shots gives all the little shots more second chances.
The danger of something as enormous, powerful and rich as Amazon in a place like this is that people immediately start ascribing the power of God to it. We heard it all during the pendency of the decision.
If Amazon comes here, we will all be in the movies. We will all have beautiful hair, and we will be able to cure cancer. Even more important, we will all be rich.
So interesting, because the new $15 an hour pay rate that Amazon recently announced with fanfare is five bucks an hour cheaper than what it often costs now in Dallas to hire a painter’s helper or a landscape worker from the crowds of men and women standing on corners looking for work. I’m just wondering why we would assume Amazon’s the one to exert an upward influence on anybody’s pay.
More jobs? Yes. Maybe. A lot of Amazon jobs. But let’s think again about Amazon’s announced reason for choosing NYC and D.C., that available talent pool. Amazon went to those places because the pools were big enough.
But what effect would Amazon have had if it had come to our pool? Would it not have sucked the pool dry? And then what’s left for everybody else to swim in? I’m thinking of the small start-ups, the innovators, the homegrown entities whose success begins to weave that dense social fabric and political infrastructure I’m talking about, that ability of a community to think for itself and stick up for itself.
None of that is insignificant. The knowledge, sophistication and cultural willpower of a community are enormously important factors in the whole brokerage and decision-making process of corporate location and capital investment.
Last January we talked here about the work of professor Nate Jensen at the University of Texas at Austin, co-author of a new book called Incentives to Pander: How Politicians Use Corporate Welfare for Political Gain (available only on Amazon, irony of ironies). It examines the universe of location incentives demanded by companies contemplating big moves and examines the payoffs or lack thereof for the communities that grant those incentives. Jensen offered me a deeply cautionary tale.
We see how it’s done now. Lots of universities. Pushy people. Strict standards. And big greedy gorillas. Like any great marriage, it’s a highly productive stand-off.
In fall 2017, Amazon CEO Jeff Bezos broke a bottle of Champagne over a windmill on a wind farm in Scurry, Texas, big enough to power 90,000 homes. Bezos had won generous local and state subsidies for the wind farm in part by swearing that the subsidies were a key component in Amazon’s decision whether to invest.
But before Bezos was granted the Texas tax breaks, Jensen said, he also had won a fat federal tax break by swearing to the feds that the wind farm was already under construction. The contradiction was sufficiently obvious to prompt a look by the Texas comptroller.
After looking, the comptroller found that, indeed, Amazon already had the federal tax break in hand and construction already was underway when Amazon was telling the Texans a very different story. But the comptroller said it was all OK and that people should forget about it.
That’s what I mean by old Texas. It’s the same Texas that covers up for gas companies when their leaky pipes kill children, denies fracking causes earthquakes, finds ways to evade federal air-quality standards and then blames childhood asthma on family values. There’s a reason for all that.
It is an absolute given, a cardinal rule, a core belief of the old Texas that the only way to encourage business is for the community to prostrate itself before business, to render itself abject and defenseless lest the slightest hint of independence send business off in a huff to some more servile place. That works for a certain kind of business — the gorillas-run-wild kind. The best the state can do for any of us is to remind us not to look like bananas.
But a community that isn’t even looking for a downside, that is afraid to utter a syllable of skepticism, almost inevitably winds up on the losing end of the deal because it doesn’t know enough. Jensen has an academic term for the problem. He calls it “information asymmetry.” It means the company sees all the possible chess moves, while the community wears blinders and sees only its pawn.
Councilman Kingston sent me a copy of a memo (see below) that went out yesterday from City Manager T.C. Broadnax, outlining publicly for the first time what we, the people of Dallas, were offering Amazon to get it to come here. Wow. The opening bid, before anybody even talked about subsidies from the state, was $600 million from the city, including a $425 million write-off on local property taxes.
In his memo, Broadnax told local officials the incentives would have been a great deal for Dallas, because, “Amazon HQ2 was estimated to bring an economic impact for the local economy of at least several billion dollars.”
Well, you know, when you get up into the billions on a business deal and when your half of the deal starts at $600 million, it would be nice to see more precision than “at least several billion.” How about a number of billion? And when were we going to find out about our piece?
Some of the language of the offer to Amazon reeks of the kind of obsequiousness I’m talking about. Here’s a little bit of it:
“Dallas summers can be hot, and we want to make it as comfortable as possible for employees to move throughout the HQ2 campus. We will work with you on longer term transit options once you select your HQ2 site, but as a short-term fix the City of Dallas will offer up to $1,500,000 toward shuttles, pedicabs, courtesy carts, or other quick transit solutions for HQ2 employees.”So I’m wondering, would an Amazon pedicab have been air-conditioned, or, in addition to the pedaling person, would it have required a second Dallas resident standing over the rear axle to fan the Amazon passenger with a large palm frond? And would the palm frond job have paid $15 an hour?
There is something like poetic justice in the union of the Amazon HQlets with D.C. and New York. These may be partners who truly deserve each other. We should all hope here that one day we will deserve such a union ourselves.
I think we see how it’s done now. Lots of universities. Pushy people. Strict standards. And big greedy gorillas. Like any great marriage, it’s a highly productive standoff. So what we need to learn now is how to stand off.