As you’ve likely heard, our big ol’ friend Amazon is in search of a location for its second headquarters. Unsurprisingly, they have detailed prerequisites for this new location, specifically “strong local and regional talent—particularly in software development and related fields—as well as a stable and business-friendly environment.” Geographic Expansion 101, really.
As you’ve also likely heard, cities are bending over backwards in attempts to woo the tech giant, sending them anything from well-researched proposals to 21-foot Saguaro cacti. Brown-Nosing 101, really—but can we even blame them?
Let’s look at the numbers for a second. The direct economic impact in the highest bidder’s backyard will be insane—$5 billion in construction costs and 50,000 new, high-paying jobs. What will be equally, if not more, insane is the indirect impact felt by the winning city’s local economy. If the side-effects of Amazon’s Seattle HQ serve as any indication, the lucky winner will also be able to lock down about 53,000 non-Amazon jobs and $38 billion worth of investment in the local economy in the six or so years following the deal. No wonder these cities are gifting Amazon all the cacti they can find for a shot at this.
So, to the million-dollar (sorry, multi billion dollar) question—who’s going to hit the jackpot?
More likely than not, a city that’s already hit it.
Boston, Chicago, Austin, Dallas, Denver, and DC are some of the cities whose names have been getting tossed around as top candidates. These frontrunners meet Amazon’s needs in terms of a strong talent pool and a relatively stable business environment. If selected, any of these picks would earn Amazon an A+ in their Geographic Expansion 101 class. That is, an A+ by the private sector’s grading standards.
Enrico Moretti, a professor of economics at UC Berkeley, would be unsurprised by Amazon’s new location preferences. After all, he essentially predicted Amazon’s expansion strategy back in his 2012 book The New Geography of Jobs. Moretti observed a trend within the high-innovation and high-“knowledge” sector of the US economy over the past 30 years, and it appears like it could explain one of the hidden forces behind Amazon’s decision-making. He coins this trend as “The Great Divergence” and articulates it as such:
“A handful of cities with the ‘right’ industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the ‘wrong’ industries and a limited human capital base, are stuck with dead-end jobs and low average wages.”
“More than traditional industries, the knowledge economy has an inherent tendency towards geographical agglomeration. In this context, initial advantages matter, and the future depends heavily on the past.”
Let’s break all that down a bit. So, according to Moretti, economically-stable and highly educated cities have a gravitational-like force about them, which allows them to woo high-“knowledge” companies, generate local wealth, and eventually create an even more attractive environment for other companies to relocate to. Alternatively, struggling cities have the exact opposite effect. Given this trend in the context of Amazon, I’d expect Moretti to predict that the cities who need Amazon’s headquarters the most will not get it. And that’s a problem—not for Amazon, but for the United States of America.
But, for a second, imagine a world in which the United States’ problems were actually Amazon’s, too. Of course Amazon cares about the state of the country in a macroeconomic and regulatory sense, but imagine if they somehow took it upon themselves to positively impact the country whom they call home in a way that only they have the power to do.
What if Amazon were to shock us and pick a small, struggling city for its new headquarters. There would undoubtedly be a weak talent pool and a relatively unstable business environment at the very beginning. Investors would not be happy and they would probably struggle, just as their new home has for years. But if Moretti’s trend persists, an Amazon headquarters would also create some much-needed gravitational-like force in a disenfranchised and deserving community. Before long, I would expect the firm to grow slowly from the ground up, and as they did, they would take an entire city, state, and region up with them. It would be a pretty radical kind of Corporate Social Responsibility, but radical change sometimes comes with radical decision-making.
Amazon is large enough and Jeff Bezos is wealthy enough that Amazon would be okay in the long-term. Sure, they wouldn’t be able to scale as quickly as initially anticipated, but I think I’m fine with it taking another five years to get my toilet paper delivered via drone twelve minutes after my click. In fact, maybe Amazon would be more than just “okay” in the long term. Perhaps it would be a progressive business move to garner a socially-conscious reputation for investing in an underserved city, especially in a time when our country is fighting serious wealth inequality and geographical division. Good CSR seems to lead to good business, so maybe it would be smart for other companies to turn America’s problems into their own.