Amazon HQ2 RFP

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Shepard said:
Something that's lost in all of this: What exactly is a second headquarters anyway, and what purpose does it serve?
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In reading some of the Seattleish forums, you get the sense that Amazon is doing this because they want the option to be able to leave Seattle at the very least. Probably more scaling back. But when you own or lease 40% of the Class A space there it's not something you can get rid of so easily.

Getting all those tax incentives is a nice perk of course.
 
I'd imagine that if they want the option, its so that they can have more leverage negotiating continued breaks from Seattle / Washington also...
 
^ as mentioned elsewhere, this is very similar to what Boeing did to alleviate its all-eggs-in-one-basket situation in seattle...opening a headquarters in chicago, and a major outpost in south carolina.

I think companies feel they are in a chokehold when one city owns a tremendous amount of leverage over them...in terms of labor negotiation, in terms of political and tax implications
 
People continually make the mistake that every business decision is solely about cost. It isn't, otherwise NYC and SF would have been abandoned long ago, while Mississippi, Kansas and Kentucky would be economic powerhouses. If you don't have a talent pool to draw from that can operate your business, you can be running at zero cost and its not going to matter. These Amazon jobs seem to be highly reliant on finding talented people and cost wise Boston is at no disadvantage to a place like NYC, DC or even Toronto.

I'd also disagree with the idea that the HQ location doesn't matter. This is sort of an outdated idea we learned about in grad school back in the 90's as everybody was supposed to be integrated so you could all work remotely. Companies are moving away from that now (Yahoo, IBM, etc) and consolidating in key cities. The trick is to be one of them. CEO's usually like a full staff of direct reports and other butt kissers near them landing an HQ usually is a big win. Yes, Boston should keep the tax incentives within reason (no Wisconsin Foxconn idiocy) but you can't not go all out for 50,000 high paying jobs. Its lunacy not to.
 
I don't think this is entirely about cost either. I think this is primarily about talent and specifically geographical diversification of talent access.

Amazon cannot add 50,000 more jobs in Seattle. They are too big to effectively recruit much more to that city. Amazon needs to be co-located with competition to have access to the talent pool. If all the jobs in Seattle are Amazon jobs, then people will be very wary of taking the risk of relocating to Seattle.

Amazon is EAGER to find a new place to pay engineers $200k comp packages. They aren't stingy or cheap at all. I think tax breaks and incentives will be icing on the cake for them, but that is all secondary to talent acquisition. If I'm right, Boston is way out in front of Denver or Philly or Chicago or any other city that is not already a technology giant.

Cambridge/Boston/Mass will not need to roll out a bunch of tax breaks to win this, I just hope the leadership recognizes that. Walsh seems to have the right idea already.
 
Rover said:
People continually make the mistake that every business decision is solely about cost.
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Well it does boil down to money eventually, but real estate isn't the biggest cost. Salaries and the need to attract and keep good people are a far larger concern.
 
I agree that agglomeration and access to talent matter. Also true is that the 2nd headquarters' concept seems very loosely defined, and is probably indistinguishable from 'division headquarters' or 'large office'. For that reason my hypothesis is that calling it a second hq instead of a large office is almost entirely a pr exercise aimed at extracting max tax bennies....

....not that there's anything wrong with that.
 
Chicago would be in the running if the state weren't a political and economic basket case. Can the governor and the legislature ever agree on a proposal/tax package? Even CT isn't as bad as Illinois and companies are fleeing CT left and right.
 
Rover said:
Chicago would be in the running if the state weren't a political and economic basket case. Can the governor and the legislature ever agree on a proposal/tax package? Even CT isn't as bad as Illinois and companies are fleeing CT left and right.
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Sincere question: why should Amazon care about Illinois' fiscal crisis? Could they not, essentially, cut a deal that amounted to a state-with-a-state and a city-within-a-city? If the solution is corporate tax increases and pension cuts Amazon would seem to be able to get a waiver (from the tax) or not care.

U Chicago and Northwestern U etc function this way. O'Hare and Midway function as self-financing, self-defending fiefdoms within Chicago's government. Seems like much of what the RFP asks for is already (or in contracting can be) insulated from state-level dysfunction.

Whether Florida or Olrando ever got their act together, Disney got itself the powers of a municipality within Orange County FL as the Reedy Creek Improvement District. Is there something wrong with Illinois that smart lawyers cant isolate Amazon from?
 
CSTH said:
I agree that agglomeration and access to talent matter. Also true is that the 2nd headquarters' concept seems very loosely defined, and is probably indistinguishable from 'division headquarters' or 'large office'. For that reason my hypothesis is that calling it a second hq instead of a large office is almost entirely a pr exercise aimed at extracting max tax bennies....

....not that there's anything wrong with that.
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The difference between "HQ" and "large office" is that an HQ will contain many senior executives. An article I read about HQ2 mentioned that a goal of Amazon is for each SVP to be able to pick where their team is located. Entire departments might be relocated from Seattle to HQ2 if the head thinks they can find the best talent there.

A large office could be a call center with 2,000 employees doing grunt work. An HQ implies senior leaders and highly-paid staff.
 
^ Thanks.

FWIW I think the evolution / disaggregation of the corporate HQ is a pretty fascinating topic.

It wasn't that long ago that '2,000 employees doing grunt work' was totally a core function of a corporate HQ. As we know, the new GE 'HQ' will be the other end of the spectrum - a relatively small facility dedicated to fostering innovation etc.

Also relevant is the question, what industry is amazon in anyway? Cloud services (AWS) and robotics (Kiva etc.) both fit extremely well with Boston area. Logistics and entertainment content less so.
 
stellarfun said:
This chart from 2013 tells all that you need to know.

http://www.slate.com/blogs/business...ny_how_amazon_google_and_others_stack_up.html

The median tenure of Amazon's professional workforce (note the salary) is ONE year.

Amazon needs a very big local labor pool with that kind of turnover.
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Exactly why I don't think they can consider an up-and-coming rustbelt city like Detroit, or any city without an adequate existing tech scene. Boston really is high up there in the running, I wouldn't be surprised if we get it.
 
stellarfun said:
This chart from 2013 tells all that you need to know.

http://www.slate.com/blogs/business...ny_how_amazon_google_and_others_stack_up.html

The median tenure of Amazon's professional workforce (note the salary) is ONE year.

Amazon needs a very big local labor pool with that kind of turnover.
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Amazon's short median tenure is more of a growth story than a turnover story.

Their full time total employment exceeded 350k people in Q1. Two years ago it was less than half of that. They doubled their full-time payroll in just a little over a year.

This means that the company's median tenure would be somewhere between 1 and 2 years even if no employee who ever worked for the company ever left.
 
CSTH said:
Also relevant is the question, what industry is amazon in anyway? Cloud services (AWS) and robotics (Kiva etc.) both fit extremely well with Boston area. Logistics and entertainment content less so.
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So i know its corny to quote myself...

...but after all this head scratching, it occurs to me that the rational for 'two HQs' could simply be 'we are planning on spinning out AWS as a separate business before too long'.

It has a really different growth and profitability profile. You could build a hell of a lot of distribution centers with the cash that transaction would raise.

[/pure non-architectural speculation]
 
JumboBuc said:
Amazon's short median tenure is more of a growth story than a turnover story.

Their full time total employment exceeded 350k people in Q1. Two years ago it was less than half of that. They doubled their full-time payroll in just a little over a year.

This means that the company's median tenure would be somewhere between 1 and 2 years even if no employee who ever worked for the company ever left.
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That's partly true. Full time employment is not the same as professional employment. Full time employment includes the many tens of thousands who work in the fulfillment centers.

The median tenure at Apple is 1.9 years. This is from a Sept 2017 analysis.
https://hackerlife.co/blog/san-francisco-large-corporation-employee-tenure

Assuming Amazon's median tenure at HQ2 is 3 years, and at a full headcount of 50,000, that would suggest possibly needing to hire 15,000 workers a year on average simply to replace the ones that depart. As one doesn't know the distribution under the curve, that's just a guess, but the number is pretty high.

The other unknown is how many of these employees are on one-year contracts. That could skew the data tremendously.
 
stellarfun said:
Assuming Amazon's median tenure at HQ2 is 3 years, and at a full headcount of 50,000, that would suggest possibly needing to hire 15,000 workers a year on average simply to replace the ones that depart. As one doesn't know the distribution under the curve, that's just a guess, but the number is pretty high.
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Tenure is a biased metric since when it is measured, we do not know how much longer an employee will stay at the company. It is biased downwards compared to the lifetime expected tenure of the average employee. Therefore it does not follow that a median tenure of 3 years means turnover = 50,000/3 (or anything close to that).

The better metric would be (#posted positions - # positions created) / headcount to get an average vacancy rate, but unfortunately that information is probably not public.
 
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