Thread on Amazon location decisions.
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Amazon is a huge company that opens plants--offices, data centers, and so on--in many locations. When it opens these plants, it faces several considerations.
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First, it has ceteris paribus preferences about where to build based on operational considerations. Treat these as fixed. Next, it must consider political issues. What taxes will it face in the current environment? What taxes and political burdens will it face in the future?
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For their part, cities hosting Amazon plants can often expect to benefit from their presence. Amazon is large enough that it spawns entire tech ecosystems where it hires, and knowledge spillover in dense urban areas is a well-documented phenomenon.
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In the short run, Amazon can choose where to open these facilities, and has every incentive to request tax advantages from host cities. Cities basically compete with tax breaks in order to obtain. secondary benefits from Amazon. This is *probably* healthful and efficient.
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In the long run, Amazon is at a disadvantage in dealing with regulation. Once it has made a large fixed investment in a city, it may face substantial costs to relocate. A city may be able to extract large concessions from Amazon with less resistance, at that point.
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For example, Seattle tried to deploy a (my view) punitive tax on Amazon recently. The city council was particularly cack-handed about this, and ended up withdrawing the measure; but it's illustrative of the sort of power a city might try to deploy against an incumbent firm.
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HQ2 reads to me as Amazon's attempt to deal with this longer-term political risk in several ways. First, it's a strike at Seattle specifically for lashing out at Amazon. Further, it sends a message to other jurisdictions that attempts at extraction will be rebuffed forcefully.
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Finally, it gives Amazon additional flexibility in the allocation of its workforce. If a city attempts extraction in the future, Amazon can (more easily) move existing or future jobs to another location. This may deter extraction attempts.
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Amazon is a large enough target at this point that it needs to seriously consider political risks, and HQ2 seems to me (casually observing) to be a smart way of doing this.
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My hunch given the media reaction is that doing it so *publicly* was a bad move. Everyone hates big firms, apparently, and if they're concerned about political risks the best move might be to stay low-key. The big stick would have been enough. /thread
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Replying to @eigenrobot
I think the public nature of it was to give locales opportunities to poll their constituents and get the pulse. In a well functioning democracy (read: state-level, ergo not Republic) a location whose constituents didn't want Amazon wouldn't be encouraged to offer incentives.
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Replying to @RummaTumTums @BMelton
Oooooh this is a good take. Crazy they'd choose NYC in this case, though, maybe?
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