The frenetic race to build Detroit's Amazon HQ2 bid | Hacker News Reader

The frenetic race to build Detroit's Amazon HQ2 bid

crainsdetroit.com

68 pointsrmason58 comments

Preface with the usual "I just work here and don't speak for the company", but from my point of view it always just comes down to numbers with Amazon. Make the presentation as pretty or splashy as you want but you're only doing that for your own sake, not Amazon's. You could have sent a handwritten letter with the same information.

Somewhere in the company will be a database. In it, there will be one column for every property of a city, one column for each property of the bid received (tax breaks included of course). I'll bet there will be hundreds of columns. And then there will be a very large formula that takes every property, assigns it a value to Amazon over the next 25 years, and adds it all up.

It's probably quite a complex formula. I have a friend with a master's degree in computational geometry who used to work on fulfillment center placement optimization. Lots of software dedicated to that I hear. Amazon is a data-driven company- it would never leave such problems to human intuition.

Once the data entry was done, and probably a few dozen formula updates were made as new factors were realized and added in, the decision would have been made automatically. The only problem left would be announcing it at the best time to further profit Amazon- another factor the formula probably spit out.

My guess is that we'll know when Q4 results are published. I'd love it to be my home city of Toronto, but I think the lack of tax breaks offered may push it down in the formula's ranking.

I agree as a matter of general principle. But these kind of decisions are hard to completely automate. Even if the final output is a number, you need to make judgement calls that go into the number. What's the value to Amazon to the goodness and population of schools within X distance vs. walkability vs. tax breaks? And then, what are the real deal-breakers?

You can certainly use numbers to cull the field. But you probably end up with a few cities that all look good on paper and on the numbers but have different strengths and weaknesses that are more qualitative.

Correct me if I'm wrong, please. Doesn't any sufficiently-complex non-linear optimization problem degenerate into heuristic trial and error? There's a progression of better and better solutions. With the unpredictability of the real world, and the low number of trials they'll get (this is their second HQ), I wonder greatly what they've got going on.

I studied some of this stuff at one point and have been involved in evaluations of different system architectures and the like as an analyst. You can assign weights, impute values to qualitative variables, define "must haves," etc. to create a somewhat quantitative analytical framework. This has the virtue of at least being consistent and ostensibly objective.

But once you get beyond the tax breaks and the cost of living and whatever decisions Amazon has probably already made about geographical dispersion, it will probably come down to Bezos making a call. This isn't siting a new Marriott hotel or a distribution center.

I'd expect for a decision like this, there would in fact be some subconscious (or even conscious!) ideas like "Obviously Detroit should be high on the list, if it isn't then our weights must be off," or alternatively "Detroit's proposal just doesn't look good for X reason, if it's high on the list then we should add a column about X." It's not totally unreasonable to expect that these ideas can be influenced by the usual ways that you influence humans, even if those humans work at Amazon.

Right, but I think the point was that those judgement calls were made before the proposals were sent, so at that point the human factor was done.

If this was true, they should make this spreadsheet public (google doc) with the columns set by any mayor. Basically open an auction. Why hide it?

When you are trying to extract value, you don't want to reveal your estimate of the value extracted, or even give people more information than necessary about how you are estimating the amount of value you can extract.

I.e. you'll get gamed.

Uh. So when you go to an auction and bid, the auction house gets gamed? I am not following. Each mayor could put their best offers in compared with the others.

You dont negotiate with an open book.

As the UK is finding in negotiations with the EU...

Parts of the UK are finding that negotiating _without_ any kind of playbook is hard - nothing to do with it being open or closed, it simply doesn't exist.

As somebody who grew up in the Metro Detroit area and moved away, I’m unbelievably impressed by the bid Detroit put together.

The entire region is so completely disfunctional. The idea of getting the neighboring counties (which have the money, education, and talent) to work together was unheard of.

I do think the Metro Detroit area is consistently understated as a potential tech hub. It has one of the largest cohorts of STEM people in the nation (albeit in more traditional engineering roles).

I don’t think the tax breaks will be sufficient enough because Michigan only seems to care about manufacturing plants. I hope Detroit gets the HQ2 bid or at least can use this process to start getting good tech jobs in the area.

I know I (and many of my hometown friends) would move back if the job market was closer to Seattle.

I can't speak for other states. But I do know there is an incredibly large number of people raised in Michigan that would move back in a heartbeat if the opportunity was there.

In fact Detroit has an annual event where they invite back successful people who were born in the city and try to woo them to return or to invest in the city.

http://www.crainsdetroit.com/article/20170914/news/639081/de...

> I don’t think the tax breaks will be sufficient enough because Michigan only seems to care about manufacturing plants.

I know what you mean. I remember noticing this when I was a freshly minted Wolverine and looking at my job prospects. Almost nobody in Michigan seemed to take seriously the prospect that the future might not look like the gloriously shining car-factory-centered past. Not at a policy level and not at a person-on-the-street level.

The smartest thing in my opinion the mayor of Detroit did was to turn everything about the bid over to Dan Gilbert. He's received a ton of criticism for it.

But using the talents of a billionaire entrepreneur gives Detroit a leg up in my opinion. Every other city's pitch was built inside city hall.

Detroit may not get the winning bid but no one is going to be able to say they didn't try harder than everyone else.

I actually think everybody has been quite happy with Gilbert leading the bid.

Dan Gilbert is basically the entirely driving force behind the large growth happening in Detroit.

It's kind of a sad spectacle to see mayors across the country abase themselves in the hopes of currying favor with Amazon.

I'm usually a critic of my home state for a variety of reasons but I have to say it's been impressive to watch them change over time.

Whatever folks think of Ford and Quicken Loans as companies, it's great to see the public sector being open to new ways of doing things like this (within reason of course)

I still hate the weather among other things there, so I won't likely be returning but it's heartening to see this change taking place! Even if they don't get the bid, I hope they continue this kind of thinking.

The irony is Amazon is helping put a lot of small retail out of business, and that should be of more concern to these mayors - there's way more local employment in retail than this HQ can offer.

True, but the HQ will go somewhere, right? In fact retail will probably do pretty well near wherever the campus is built.

If it’s going to go somewhere, why compete to give away tax breaks Amazon doesn’t need? It’s on par with competing to get a sports stadium.

Amazon is a giant vacuum cleaner that sucks up talented software developers from all over the country and spits them out into the local ecosystem after 2 years. That seems like a pretty valuable thing to have.

You’re assuming having a concentration of highly paid workers is a net positive, yet it’s worked out terribly for tech hubs. It drives up the cost of housing and strains infrastructure, with marginal tax base benefits.

It is difficult to evaluate. In some sense a city is either growing or shrinking, and shrinking very negatively impacts municipalities because it is hard to 'scale down' the local bureaucracy. On the other hand too much growth makes the city less desireable for current residents--lots of new infrastructure gets built but most of it isn't for current residents. (Or in the case of SF no infrastructure gets built and the housing market becomes a knife fight in a phone booth.)

In the long term I think that density is too valuable to large cities, and passing up an opportunity to increase density is short-sighted.

Wonder why PaddyPower does not have Detroit even on their (long)list: https://www.goo.gl/p55Loa

Seems like they have a flawed understanding of what's going on. Silicon Valley, or even NorCal in general, should be the last place for an HQ2.

That seems an odd list. I would probably have named San Jose as one of the least likely places among the cities submitting bids.

As for Boston, Amazon is admittedly already adding a sizable facility in the Seaport but costs for an HQ2 and cost of living in the city would seem to disqualify.

Personally, I'd put my money on a major city that isn't a current tech hub but could become more of one.

Forget about what the RFP ranks as important criteria, the only thing that really matters is Amazon's ability to hire 50,000 high-end tech industry workers (from new grads to seasoned tech executives). There is only one location in the world that can supply this kind of tech talent without draining the rest of the ecosystem and that's Silicon Valley (not including SF or Oakland here).

Google is already planning it's future growth in downtown San Jose (8 million square foot "Google Village"), Adobe is expanding it's downtown SJ presence with a fourth tower, Apple and Microsoft are planning new campuses in north SJ, and Amazon is already expanding it's South Bay presence significantly. As more companies look to expand to urban, transit oriented sites, Downtown SJ will emerge as a premier location for tech company HQs.

The Bay Area is already incredibly glutted, and is the site of most of Amazon's competitors. They already have a presence there that can be gradually expanded upon. There is no reason to build an entire second headquarters there unless they wanted to bring about even further hatred and rancor on the part of those who detest growing CoL. They would only fan the flames of anti-tech discontent. It also makes the entire HQ2 contest completely pointless, as the mayor of San Jose has already rejected it to begin with: https://www.cnbc.com/video/2017/10/05/san-jose-mayor-no-swee...

Yes, the CoL (housing in particular) is a significant issue for the entire Bay Area but that hasn't stopped the rest of the industry from continued local expansion. I would argue for a strong regional authority to tackle this issue but that's another discussion. Also, San Jose's mayor has not rejected the Amazon HQ2 proposal, only the notion of providing major financial/tax incentives to any corporation as he feels the civic benefit does not outweigh the cost.

Expansion is one thing, bringing in tens of thousands of employees with a whole new headquarters is another. Traffic alone it would be nightmarish. And the contest format would be a terrible charade; why give hope to non-tech hub communities at all if your plan was to flock to Silicon Valley like everyone else?

Yeah, if you've already reached the IMO very misguided conclusion that the only rational place to site a large tech HQ/HQ2 is the Bay area, why on earth would you go through the motions of this whole process? Hope that some Bay Area city is going to be so desperate for you to move in that they'll shower you with incentives? Possible but unlikely. And it's not like some previously unknown pool of engineering and other professional talent is going to suddenly spring up somewhere.

I'm often pretty cynical (and Amazon will certainly be looking for sweetheart deals) but this seems a legitimate effort to find a location that may not be an obvious choice.

I thought with parimutuel betting, the odds change depending upon the gamblers who are placing bets and the house ensuring the house makes money, not the house setting the odds by some insight into the field.

That's correct but this not a parimutuel wager, it's fixed odds; so if you take Atlanta at 3 to 1, you will be paid 3 to 1 for Atlanta winning regardless of what other folks bet. In parimutuel your payout would adjust according to the rest of the money wagered until the betting closed. Horse race bets are often parimutuel, but most proposition bets such as these are not.

The books can be wrong, and the betting markets aren't perfect but they can be useful tool to gather what the rough consensus is at any given time.

Thanks for the clarification, I thought it was parimutuel and the odds were going to change as more people bet on it.

Quite the contrary, they probably have a very good understanding and are happy to take losing wagers on San Jose and the public is willing to oblige.

Who are the people that place PaddyPower bets?

What does Detroit really have to offer?

If Amazon did setup shop there, it would be a blow to rust belt companies as they start a salary war trying to their keep talent.

As talent enters an area, couldn't it lead to other tech companies following, then VCs, thus creating a new ecosystem and industry hub?

Google and Microsoft already have footprints downtown and in the suburbs. Detroit’s startup community needs maturity, and this will only help.

Those are sales offices with little if any engineering presence.

Low cost of living (reducing required salaries). Good airport, which was one of the requirements. Address to Canada if you wanted to have an extra office with employees America won't let in. Michigan has high quality stem grads.

It's definitely a worthwhile city that meets most of Amazon's needs.

When is the final decision expected to be announced?

Why doesn't Amazon just buy up a block of NYC like all the other big tech companies?

Expense. Amazon is cheap. It’s one of their virtues.

Won't any city be cheap because the city is subsidizing the deal? Isn't the whole point of these theatrics to get Amazon a great deal anywhere?

Indeed. However the question I was responding to was “why not NYC?”

Who would want to work in Detroit? Employees won’t want to work late.

Why do you say this?

It's a reference to the perception of Detroit as a dangerous place to be after dark.

That is outdated information. Downtown is fine after dark, especially if you're in Dan Gilbert's security zone. He's got cameras and security people all around his buildings 24 hours a day.

Now as I tell many others there are parts of the city I wouldn't visit in either the daytime or at night. But there are very few good reasons to ever visit those neighborhoods.

This is great stuff, but the decision will likely be made based on where Amazon execs in Seattle can get a break from Seattle weather. That ain't Detroit.

Greyness aside, there aren't a lot of places in the US that have uncontroversially better weather than Seattle other than California. Sure, if hot/dry or hot/humid + moderate are your goals, there are places. Las Vegas isn't clearly better weather than Seattle for a lot of people. Austin certainly isn't. Maybe some mountain locations. But, really, Seattle doesn't have bad weather in the scheme of things and Amazon isn't going to establish a new location in prime California real estate.

Seattle is one of the only metros in the country that experiences rainy weather for weeks on end every year. For many people, it has some of the worst weather around.

This is risking a flame war, but I'd suggest anyplace with so little sun has "uncontroversially" terrible weather. It literally causes health issues.

Also, a city doesn't need good weather all year to have better weather than Seattle.

All that said, I personally doubt weather (and execs' preferences about it) will factor directly into the decision.

It depends on what people value. Seattle (like Portland) does have gloomy winters--as does a lot of the northern tier of the US. But it doesn't get big snowfalls, bitter temperatures or--in the summer--long stretches of hot, humid weather or blisteringly hot and dry weather. The summer in Seattle tends to be about as pleasant as anywhere.

I can certainly see someone preferring Phoenix or Las Vegas, say, to Seattle in terms of weather but I wouldn't personally.

(I do agree that weather is perhaps one of the least relevant factors to this decision.)

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