Ho hum, or hidden externalities?

The ratings agency Fitch shrugged on Tuesday at what it considered the “muted impact” on the economies and credit ratings of New York and Washington.

According to Fitch, 25,000 jobs are the equivalent of about a quarter of a percentage point of all the jobs in metro New York. In metro Washington, they’d represent about three-quarters of a percentage point of the labor force. The Washington region is already growing by about 50,000 jobs, or an Amazon HQ2, each year, according to the D.C. Policy Center. New York over the past year gained about 70,000 jobs.

Here is more from Emily Badger at the NYT.


While Amazon makes some products, it's mainly in the distribution business. And while DC and NY may pursue Amazon's executive offices, most of the country pursues Amazon's distribution centers, offering the same kind but not the amount of tax concessions and other benefits as DC and NY. One might make the point that America has gone from the world's industrial leader to the world's distribution leader (facilitated by the AI produced by so-called tech). As for the hidden externalities, if Bezos is hell-bent on becoming the ruler of the world, being close to his corporate offices, like being a courtier close to the king, might be a positive externality; or a negative externality if the demimonde take issue with the ruling class.

Amazon retail loses money every year.

AWS is what drives Amazon.

Ich bin sicher, diese Schriftstück berührt hat
all das Interet Zuschauer, es ist wirklich sehr schön Artikel auf denn Aufbau neuer website.

Vielen Dank für die verheißungs Dokument. Es war in der Tatt
eiin Freizeitkonto ist. Schauen fortgeschritten weit angenehm vonn Ihnen hinzugefügt!
Übrigens Wie kann kommuniziere wir?

Cut back limbs that hold over the roof.

To refine further, Amazon is in the infrastructure business. See AWS, FBA, Kindle Self Publishing, and more.

Any short paragraph on what Amazon is will surely be wrong. More so any one sentence.

Amazon has conquered a number of markets and may now choose which ones from which to extract profit.

And they're certainly not limited or prevented from entering any new markets.

"Alexa, do my taxes."

I'm sorry. I don't know that one.

"Alexis Texas is an American pornographic actress, director, and featured dancer"

Amazing that the pro-business Wall Street Journal now sides with a socialist like Ocasio-Cortez when it comes to America's most valuable company and the world's richest man:


How much of this is really the old capitalism/socialism debate instead of something that hits closer to the truth like East Coast versus West Coast battle for relevance or Bezos vs Murdoch or even old money vs new money?

Don't misunderstand. They are not siding with Ocasio-Cortez's "socialist" opinion that Amazon should pay their taxes and the government give it away as free stuff. They are only saying that Amazon should be treated the same way and not get special treatment. A vast difference.

The calculable number of jobs is pretty irrelevant. What is relevant is the attendant interaction effects of having Amazon operating within your city. And those effects are likely more powerful from an HQ than a distribution center (since new ideas aren't generated within those hubs).

So are there more attendant interactions and ideas forthcoming? I see NY and D.C. as conservative, not creative choices that represent entrenchment of a powerful, well-established company that needs to be close to power/wealth centers to control and preserve its gains.

+1 a super-conservative choice by Amazon; they wanted to replicate Seattle. If they couldn't get people to move to Seattle, how are they going to get them to move to NYC? In some sense it's a heavy bet on H1Bs who seem to exhibit systematically different housing preferences from Americans. DC seems less bad than NYC, but still not very helpful.

A complementary choice like Dallas or Atlanta would have made more sense from a portfolio viewpoint.

You’re super dumb if you think this had much to do with anything else other than where Jeff Bezos wants to spend his time. Bezos doesn’t want to hang around in Atlanta.

The disruption won't come from the 25,000 employees in the near term. It will come from the rapid employee growth (https://www.realfinanceguy.com/home/2018/9/1/amazon-stock-compensation-liability) that will follow.

The radical introduction of West Coast problem-solving and culture-fit interview and hiring standards will be disruptive as well, in contrast to the East Coast resume-based and trivial knowledge interview.

"The radical introduction of West Coast problem-solving and culture-fit interview and hiring standards will be disruptive as well, in contrast to the East Coast resume-based and trivial knowledge interview."

That's an interesting observation. I'm thinking of two variations of a basic question: if I were to interview for a tech job, would the experience be different on the east coast vs west coast? If I were to interview for a "regular job" ie non-tech job at a non-tech company, maybe accounting or payroll or sales supervision or whatever, would the experience be different on the different coasts?

It's /pretty/ similar within growth tech and across region. Also, Amazon and Google already have thousands of employees in NYC.

"Seen in this context, the 50,000 workers Amazon plans to bring over the next ten or so years is a marginal change in employment in the Metro region."

All those subsidies being unnecessary, then.

"Although it is not a direct subsidy, Virginia’s effort to secure Amazon also included an ambitious plan to spend nearly $1.1 billion over 20 years to expand tech higher education in the state. Amazon said this was an initiative by the state and not something that the company proposed.

One aim is to raise the number of bachelor’s and master’s degrees awarded in the computer sciences and related fields by 25,000 to 35,000 over the next two decades, beyond what was already forecast. The plan includes construction by Virginia Tech of a graduate campus focused on innovation in Alexandria, and expansion of George Mason ( NB...Don...That would be George Mason Keynes) University’s tech program in Arlington.

Virginia Gov. Ralph Northam (D) described the package as “a new model of economic development for the 21st century.”


Remember when you went to high school, and you had a feeling that some of the teachers were not that bright?

And remember how, if you were that one in a hundred high school students who thinks about his or her teachers even a little bit, years later ----remember how you got into that unexpected (I mean, who really cared?) conversation about which teachers were great people but just fucking stupid as a rock?

Look not many people have had such an experience, have had such conversations. In today's world, students go forth and make money, and get jobs, and forget their teachers. Sometimes, in very unusual situations, they have a conversation with somebody about one or two out of the 30 or 40 teachers who drew a salary all those years from teaching the ragruts and lonely adolescents we all once were.

Northam was one of those teachers who was just as fucking stupid as a rock.

Everybody knows it, and I apologize for saying it plainly, but it is true. One wants him to enjoy the better things in life, and to love every day that he lives in this world, every day that he is blessed with to have because God who put him on this earth ---- but he is as dumb as a rock. Even people who voted for him know it.

Now I understand why you were a lonely adolescent.

No credible model for externalities or uninspired analysts more likely.

Probably not entirely negligible. I think Amazon wound up choosing NYC and DC and splitting between them because they see the virtue of not being the target of everyone's ire. In Seattle, it seems the civic mood is very-anti Amazon. Personal observation.

I'm a little bit surprised by the choice of Long Island City. Very few subway trains go there, and even a few years ago it felt very remote in a way that Brooklyn neighborhoods by the river don't. Again, personal observation, not backed by data.

In the metro areas, probably a drop in the bucket.

LIC was labeled as an "opportunity zone" which under Trump's tax plan means even more tax benefits on top of what the city was giving them.

Plus you're already halfway to JFK or LGA

I saw something which I see connected on Twitter. It was a claim that too many people want to build cities from scratch (*). It was talking about those city of the future type ideas.

And the idea was that instead you want to encourage building and transformation and innovation everywhere.

Don't court megacorps, make your junior college better.

* - or seasteads?

Size matters. If Amazon was no bigger than its cloud business, which produces most of its profits, Amazon would be a tick on a hog. Amazon's current P/E ratio is about 100 (low by its historical P/E ratio - it was 3,600 in September 2012). Simple arbitrage means means that Amazon could buy any business using a multiple of 100 in valuing the business. Think of the power that gives Amazon. How many blog posts at this blog on the power of arbitrage and monopoly?

+1, P/E will continue to drop however. Also, MS is making strong inroads on the cloud business. Advertising is their next profit growth engine.

I do suspect there is a difference between a city that's getting 25,000 new jobs a year 'naturally' and gaining 25,000 jobs from a prestige company establishing a 'headquarters' in the city. I suspect the gain from a single source acts like adding a new 'hub' to the network in the region while the organic job growth is probably simply adding more spokes to existing networks.

Hence it makes sense for cities to offer special incentives for a headquarters to come to town. That plus there's the fact that if the city offers billions of 'incentives' and the company chooses somewhere else, nothing is lost. The additional growth is marginal and the incentives are likewise marginal. How is that different from a hotel using Groupon to offload empty rooms for less than the standard nightly rate?

"That plus there's the fact that if the city offers billions of 'incentives' and the company chooses somewhere else, nothing is lost"

Actually a lot of these cities DID spend non-trivial amounts of money putting together bids and likely hiring consultants to help with the bidding process.
It was always a scam, Bezos wants to spend more time in NYC and Washington and NOT in Dallas or Columbus. It was always just a way to extract more concessions from NY and DC. Bezos will also likely help Andrew Cuomo with his 2020 Presidential run and so Cuomo is happy to exchange this help for NY State government largess.

Yes putting together a 'pitch' can be expensive. Let's say a city/state spends $5M on it. 25,000 jobs with an average pay of $150K/yr is $3.750B added to local GDP before we even consider any possible multiplier effects. If govt spends $5M on a 1% chance of putting together a winning package that doesn't seem like a bad deal to me.

"Bezos will also likely help Andrew Cuomo with his 2020 Presidential run and so Cuomo is happy to exchange this help for NY State government largess."

I think we are spoiled here in the US with the concept of price. You walk into Wal-Mart and it says a rug cost $25. There's 100 rugs, they all cost $25. That's the price. If you find out the guy in front of you gets the carpet for $12 you think something has gone wrong.

In an earlier age and in different places, this is not how prices work. In an earlier age you'd approach the rug merchant in the street. You'd tell him his product looks like crap. He would tell you they are the best in the world. You'd ask how much, he would say $100, you would say $5. You'd end at $25 after lots of shouting. The next guy might pay $50. The guy after that who offers to buy 10 carpets at once may get him down to $15 each.

The Wal-Mart way views the current tax rate as the 'price'. Any deviation from that down is the gov't 'giving' something to someone. But is it really? Why should the entity that's offering to bring thousands of jobs in a single shot into the economy not have a different 'price' than the guy whose starting 4 jobs because he's opening a repair shop? Is 'wholesale pricing' really wrong?

Granted the price has to be set correctly. Just because you're big enough to buy wholesale doesn't mean the wholesale price is zero.

They had a ZERO 0% chance of getting the Amazon HQ you dumb dumb. Bezos doesn’t want to hang around in Fort Worth.

You're assuming that Bezos simply choose cities close to his houses. Hence all the other cities that pitched could have saved the effort and the two winning cities shouldn't have offered anything to him.

But that's just a guess as to his motivations and we don't know if it was really the only thing he cared about or simply a bias that he allowed to influence the selection that could have been overcome by another city with a good enough pitch (how hard would it have been for him to buy another mansion near Fort worth?).

Amazon's 2 city choices are a puzzler !

Amazon could have selected almost any area in the U.S. with reasonable infrastructure. Cost and employee comfort were obviously not prime criteria -- NYC & DC are hell holes for average workers -- cost of living/taxes, traffic, housing/school choices, corrupt local government, etc.

NYC & DC are major internet nodes and centers of political power.

Who works at an Amazon HQ versus the many Amazon distribution centers -- paper shufflers, oersonnel departments, finance/accounting people, buyers of wholesale goods/services, lawyers & staff, IT people, layers of managers, janitors, etc.

School choices, and local government to some extent, are pretty good in NoVA. Taxes are also modest.

"Amazon's 2 city choices are a puzzler !"

No they aren't moron, Bezos wants to spend his time in NYC and DC NOT in Columbus, Ohio. The whole process was a scam. If you believe otherwise you're truly stupid.

NYC will pay Amazon roughly $50k per job for 25,000 $150k jobs. This is significantly better than Wisconsin paying Foxconn over $200k per job for 3,000 $50k jobs. Can anyone explain why winning rich blue states continue to win while losing poorer red states continue to lose? This can't be good for the country.

Foxconn was building a manufacturing facility, not an HQ. A manufacturing facility is far more expensive and valuable. So, fundamentally that's an apples to oranges comparison.

Why is a manufacturing facility more valuable? If anything from the POV of voters it seems the opposite. A HQ is essentially a large office building. One could see Amazon leaving a HQ and Apple, Netflix, Walmart or a host of other companies taking over the space. A manufacturing facility, esp. a very large one tends to be pretty specialized and if the parent company leaves it is likely to sit as a huge vacant box on the landscape for a long time before someone figures out what to do with it. How valuable are all the old auto plants to Detroit?

Looking at the math, high tech jobs are better than manufacturing all around. There's more of them and pays more. How is manufacturing more valuable when the market is clearly telling you punching code is more valuable than bending steel?

By that logic, plenty of "valuable" decaying factories all over the Rust Belt. Streets of Detroit must be paved in gold. oh wait....

FoxConn was spending billions building a high tech manufacturing facility. Amazon is building an office building. One costs a lot more than the other and represents a much more sizable capital investment.

I'm not saying that Wisconsin got a good deal, just that these aren't identical comparisons.

So let's say a huge office building will cost $3B to build. Then 25,000 jobs avg $150k a year will happen in that building.

Robotcon wants to spend $10B to build a huge manufacturing building...$1B to build the giant box and $9B on huge robots built in China and put inside that box. After that there will be 50 people with $75,000 /year jobs working there. .... My father-in-law used to complain about the old manufacturing businesses in East Jersey that shut down taking thousands of jobs with them. A new warehouse takes over the empty space but this 'business' is only a dozen jobs for guys to drive forklifts.

Clearly the 2nd building is a larger capital investment. Both projects will entail some local temporary construction jobs to build the initial building and then after that it will host ongoing jobs.

I do think we can 'compare' these two projects but the initial capital investment isn't the best way to compare them. The initial investment is only temporary. What really counts in the long run is the life of the building and the day to day jobs that will happen there.

Yes, I think if you start looking at the details you can develop a comparison. But you have to account for the various differences.

First, manufacturing jobs always entail a significant amount of transportation of parts in and finished goods out. They use significantly more utilities than an office. In addition, local governments tend to derive a large part of their revenue from property & inventory taxes which will be much higher for such a facility.

Furthermore, high tech manufacturing facilities are generally refurbished on a 3 to 5 year cycle. So, once such a facility is built, you can expect additional significant capital investments on a routine basis. The existing automation equipment will be replaced as it becomes obsolete and additional lines will be added as needed.

Thirdly, any large business investment will create surrounding jobs. The Amazon HQ in Nashville has been reported as being 5,000 direct jobs and an additional indirect 8,000 jobs. That's a multiplier of 1.6x. Manufacturing facilities tend to have a much higher multiplier of around 3x in additional indirect jobs.

In addition to those factors I've mentioned, I'm sure there are numerous other ones that didn't come to mind.

"What really counts in the long run is the life of the building and the day to day jobs that will happen there."

Yes, I agree. But manufacturing facilities use and generate far more ongoing activity than an office does.

This whole HQ2 thing was a sham. Bezos wanted all along to live in New York and have lobbying power in DC. But it had to look like a competition to maximize tax breaks.

Only intelligent comment here. This thread proves how much of a fraud Cowen and how gullible and stupid his readers are.

This whole Amazon HQ2 thing has been full of low-quality analysis on both sides of the debate. On the liberal side, it is unclear what they think the right arrangement is, or even how to judge any particular arrangement.

On the conservative/pro-development side, there seems an inability to grasp or at least articulate the difference between "development is good for the whole on average" and "all development is Pareto optimal, why would anyone complain?" It is completely possible that the first is true, yet it is also highly rational for the people who live in that area who will not be employed by Amazon to believe that they will be worse off after the development and to fight against it.

Relocation in summary: rent-seeking

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