Behind Amazon’s HQ2 fiasco
bloomberg.com
bloomberg.com
Until then, I would take anything you read in Bloomberg w/ a grain of salt.
If the story is that a small handful of motherboards that were destined to be shipped to cloud providers from Supermicro had some remote monitoring / control capabilities (of varying types opportunistically applied) added to them at the behest of the Chinese government that sounds completely plausible and incredibly hard to verify and/or defend against.
I say plausible as we know that US intelligence agencies have conducted similar actions:
https://arstechnica.com/tech-policy/2014/05/photos-of-an-nsa...
And that's without even direct access to the manufacturing floor (as in the Supermicro case).
Also take into account the fact that when the story first broke, people were quick to point to past reports by the same journalists that are provably false but never retracted.
Btw, last I heard about this story, it was said (IIRC) that Bloomberg assigned different journalists to re-investigate it. Did anything ever come of it?
If they're unable to determine the veracity of the story, they should retract it. If they're convinced of some elements of the story but not others, they should say so.
The failure to follow up with either affirmation or retraction seems dishonest.
I ask, because it is quite plausible to have something like this planted, considering that majority of electronics is produced in one country.
On the other hand, why should Amazon leave money on the table to be happily scooped up by other companies. Forget Tesla, Washington state was giving billions of dollars in subsidies to Boeing, while Boeing was cutting jobs in Washington. The city council of Seattle was feuding with Amazon for "for making the city too expensive". The city is complaining that Amazon is making some of their citizens too rich.
I think his frustration would be understandable as businessman, and not as envy.
Of course the whole system is perverse and corrupt, but hate the game, not the player.
The city would prefer that Amazon's presence has benefits for citizens as a whole - or at least didn't make their live worse - rather than enriching a few. Seems reasonable to me.
That said, the problem is that average wages don't rise as fast as the cost of living does. But that housing is so expensive is a failure of local government policies, and by extension, the voters who support those policies. Housing doesn't have to be super expensive; voters actively choose policies that make it so.
People are getting what they voted for, and they're mad as hell about it.
And that's presumably part of the problem
> But that housing is so expensive is a failure of local government policies, and by extension, the voters who support those policies. Housing doesn't have to be super expensive.
I'd be interested to know precisely which local government policies are failing here. To a naive outsider, it sounds as if its likely that well-off incomers are displacing existing populations from desirable areas/properties.
What are the failures of local government housing policy? Failure to relax standards so that existing residence can move into nice high-density prefab blocks built on existing green-space?
Like, when demand goes straight up and supply can't go nearly as fast, what else would anyone expect? I don't understand why everyone always acts so shocked that the completely predictable happens over and over.
Seattle has actually been much better about allowing more housing than some peer cities, like SF. But compared to cities in most other developed countries, the situation is still awful. For example, the kind of very low density zoning that is commonplace in Seattle literally doesn't exist anywhere in Japan or Germany.
I don't think you'll find many urbanists or YIMBYs pushing to demolish greenspace like parks or trails. I'm certainly not; if anything, I'd prefer to push to acquire more greenspace, perhaps by redeveloping surface parking lots. As for housing needs, there's plenty of space where things are already developed.
Thay aren't shocked, as you say its a predictable side effect. That's why cities have to be careful when saying yes please to the economic growth promised by big companies - it can have a detrimental effects on the people living there. Zoning regulations aren't usually arbitrary (I can't speak for any particular city's ordinances) they are there to ensure that minimum housing standards are met, that people don't find themselves living too close to heavy industrial areas, that the infrastructure and green space can cope.
> Zoning regulations aren't usually arbitrary
True, in many cases they were designed to keep out undesirables, like people who are poor, or non-white. That's not arbitrary, it's intentionally bigoted.
Nobody's suggesting dumping factories into residential areas, or relaxing basic safety standards. That type of zoning is absolutely fine.
The biggest reason is political, that people have NIMBY tendencies: yes there needs to be more housing somewhere, but put it somewhere else please. I don't want to have to worry about parking or see unsightly apartments on my block.
I don't dispute that infrastructure is a concern, but it's not a blocker. Cities growing quickly isn't some unfathomable phenomenon of the 21st century, the logistics can be handled if people want it politically.
There's so much economic development that could happen if we simply allowed builders to build the housing that people so desperately need. its win win.
By definition new apartments in a less dense area will have to stand out and the transitioning will result in either clashing. The alternative is they do it in a big wave and say buy out a small neighborhood cul de sac and turn them into apartments. It wouldn't clash any more even if they went with something downright garish but the big changes like that also upset people as they find it jarring.
Are they really in denial though, I mean many want the housing prices to go up because it means their housing ( asset ) increases as well. So there is clearly a conflict of interest.
There's definitely a grouping of people who just think adding more housing doesn't help lower prices.
*typed with thumbs
The time constraint you mention is often artificial, six months for permitting here and two months for an impact study there. Actual construction is surprisingly fast.
Also, manufacturing delays don't have any impact on supply and demand. They are part of the "supply".
...with one significant difference: communities are generally much more amenable to increased jobs than increased residents. And companies growing fast usually are cool with huge buildings in the city center, which is the one place where cities are generally fine with high density. Getting cities to be okay with, say, low-rise housing developments across the city is a much harder ask. So it really does just come down to zoning and zoning-adjacent concerns (e.g. community input meetings where developments get shot down).
But, what really happens, is the "city" or "city council" wants is to score political points, because a tax would also impact themselves and their friends and family. Everyone wants someone else to pay to benefit citizens as a whole, when obviously the fairest way is to pass a tax applicable to all "enriched" citizens.
It is like reacting to a give away of free shoes to orphans with "Those orphan shoes aren't organic, the bastards!" while ignoring the others make luxury shoes /out of/ orphans because "Blood of the Innocent" brand Cobblers always does that sort of thing.
They did not play the game by the (unspoken) rules.
That's how they got to where they are. Not surprised they felt untouchable.
In an ideal world, there wouldn't be any money on the table.
... this is eerily similar to one of the major drawbacks of an authoritarian regime, where everyone tries to please the Great Leader while no-one dares to express any unpleasant truth.
I see this happen all the time in the organization I work for. Some folks say that X won't work, product team tries X, and if it ends up not working, they say, "You ignored our feedback on X!" But you just can't really know whether they ignored your feedback, or whether they considered it and decided not to act on it for any of a number of reasons. IMO, the "ignored" narrative is pretty uncharitable, even if it is the natural and easy one to assume. It feels good to be vindicated. It feels less good to think about how teams are dealing with vast numbers of competing constraints, and sometimes have to take gambles (a central feature of which is the possibility of loss).
It seems like this type of thing happens all the time. Almost every time something bad happens, there was some naysayer who predicted it. But you never hear about the cases where the critics were wrong. The classic Slashdot comment r.e. the iPod is the counterexample that proves the rule. It's such a notable comment because naysayers are almost never so blatantly and visibly cited for their incorrect calls.
Anyway, it's not even clear that the team was wrong to discard this feedback. They got their tax break, didn't they? Along with a bunch of bad PR at the time. But I had totally forgotten that this thing even happened until this article brought it up. I'll probably forget again by next week, and so will most everyone else.
And then there is the opposite CmdrTaco comment, where he thought the lack of X (WiFi, larger storage) would be a problem and it wasn’t.
The article states that "red flags" raised by "Employees with experience" "were ignored" by court jesters.
If objective, it states that knowledgeable folks critics were not neglected as "OK but let's go ahead anyway in order to check the limits".
I only see 2 contexts where it may be adequate:
A/ periodically poking the limits may be useful in order to be sure they didn't disappear,
B/ to search for a way to overcome them.
If active experts immediately "raise red flags" one may think that A/ isn't pertinent, because by definition they (right now) cope with the limits and therefore know that they aren't changing/crumbling down (for any reason).
B/ is only really pertinent if there is at least a vague new idea about the approach, about a way to tackle the challenge. "Let's try because if we succeed our Great Leader will be happy" isn't a plan, not even wishful thinking.
There's where the whole chain of observations breaks down. People whose desired course of action was rejected can rarely be objective about the folks who rejected their advice.
Even if they did give an interview, what do you think they would say? "Yeah, we totally ignored the feedback about political risks. Didn't even read it. And it blew up in our faces. Aren't we dumb?" There's no way that it would be admitted. It would be framed as a calculated gambit either way.
If this new theory isn't dumb, even if it proved wrong, it may save their faces (as there often is some useful lesson to draw from such "this new idea is apparently good, let's put it at test" failure).
They didn't.
Therefore either the journalist didn't interview them (or neglected their answer), xor they didn't reply because they had no new theory, and their only motive was "let's try to Please the Master, by sheer luck we may succeed and will benefit from it, and in case of failure the Master will not punish because he liked the objective and the approach".
Practically speaking, I don't think this can really work, because I don't think employees will necessarily feel good about betting on things like this. You also have some pretty severe moral hazards when you have employees who stand to gain financially if things go badly for the company. If I take a significant short position on NYC accepting an Amazon headquarters, I now have an incentive to leak negative things about the employer or otherwise sabotage the deal in order to get my contracts to close in my favor.
Considering feedback and not truly taking the time to understand the risk and to discuss the decision with the origin of the feedback is ignoring the feedback. People with the power to make decisions in an organization often follow this pattern. It's the mindset of a fool to think that they know better than the people closest to and most impacted by a decision. Good leadership enables those who are closest to the problem to make the decision or minimally discuss the pros and cons of the decision providing any missing information before making it.
I can't begin to count the number of times that those in leadership roles have made decisions only to walk back on them after they failed citing the exact same reason of feedback they received prior to making the decision. Often the language is spun to obfuscate this but when pressed the reality is made clear.
Worse case, I have witnessed vindictive measures taken by leadership against those who, correctly after the outcome of the decision was realized, criticized the decisions being made.
It's not always about a single naysayer. It's also the bizarre perception that one needs to "have all the answers" when they make it to leadership. We should not ignore the reality that incompetent leadership is real and happens more often than people think.
People who negotiate these deals are in a completely different camp to the average employee, they are basically direct hires/fires of the CEO
I never understood why in the US (and in more and more other places as well) it's considered legitimate to give billions to private profit-seeking corporations so they can do the kind of stuff that private profit-seeking corporations do anyway: hire people, build stuff etc.
If you're going to make $5B in the next 10 years because of a corporation, and giving them $1B now to incentivize them to come to New York instead of Chicago makes a ton of sense. I'm making those numbers up, but that's the thinking.
So now you have a few people in control of a big pot of future taxpayer money who have the ability to make up numbers however they see fit. There's only one way that story ends.
Not to mention the race to the bottom it causes as time goes on since there are fewer and fewer big organizations being courted by more and more desperate governments.
These were thousands of SWE jobs. Amazon would have paid significant payroll taxes (which are federal but that doesn't fit the narrative so people ignore it) and their employees would have paid millions a year in city and state income taxes, property taxes, etc. Getting a high-paying company like Amazon in your city is a huge economic boon and is totally worth up front tax breaks. Remember, it's a tax break, you're just agreeing not to take money you already don't have.
>It is crazy to allow tax breaks for company's that largely don't pay taxes to start with, especially extremely profitable companies.
Again, Amazon pays tens (maybe hundreds) of millions in taxes every year. You're just repeating a political talking point based solely on what they pay at federal income taxes (due to loss carry-overs).
I get that that's the theory, but does it ever actually work in practice? Do you know instances when massive subsidies attracted big corporations that actually created enough jobs, externalities etc. to compensate for the handouts they received?
The bringing home the bacon culture is a larger toxic phenomenon given the "bandit towns" doing things like lowering highway speed traps and the town being vastly composed of traffic cops.
More seriously, the problem is one of moral hazard: The politicians making these decisions aren't playing with their own money. The people whose money it is aren't buying seats at their $500-a-plate fundraising breakfasts, either.
Exactly. This applies no matter who else is involved.. whether it's billionaires looking for incentives, city unions looking for better deals, or candidates offering to pay for college, healthcare, and cell phones.
When you're spending someone else's money, cost isn't a problem and accountability is punted to someone else.
I think the difference here is that it's easy to name & shame one entity than millions.
True that!
Btw, the (apocryphal) Steinbeck quote I think is about socialism/communism. I don't think we need to go as far as that to figure out that giving billions in subsidies to mega corporations is maybe not a good thing.
For people to say, "Turns out that I'm not ever going to be rich, and maybe we ought to work on a system that allows even poor people to live tolerable lives instead" would require a major rewrite of the American character.
I wouldn't be that pessimistic. As far as I understand it, when polled Americans are significantly to the left of what mainstream politics has become. At least when it comes to economic issues.
We are thrilled to have them. We would much rather contend with growth problems than a loss of tax revenues, reduced property values, list employment, or low quality jobs. We have subsidize part of their expansion, but the growth will pay back that investment in 5-7 years. We can live that ROI.
EDIT: cleanup/clarification
As an Arlingtoninian, I remain skeptical that a response of the appropriate magnitude will occur in the region. Those who aren't fortunate enough to have a well-paying job will be forced further outside of the beltway, further worsening their commutes. Affordable apartment buildings will continue to be overhauled and become "luxury", demanding an extra $300+ in rent a month. Well-maintained medium small businesses that were barely breaking even will be forced to shutter as banks and upscale gyms take their spots. This has happened in the region, and will only accelerate with HQ2.
> loss of tax revenues, reduced property values, list employment, or low quality jobs
AFAIK, Arlington was turning around their office vacancy rate before HQ2. Admittedly, it was more focused on the Rosslyn-Ballston corridor, but still...
HQ2 is a great case study on why we ought to have the Land Value Tax. Under this regime, wherever Amazon chooses to put their HQ would have all the same market mechanics occur (prices would still rise with the market) but the increase in prices would be seized as tax revenues and not as a windfall for landlords who had nothing to do with why Amazon chose to put HQ2 there. The region could then use this to e.g. build public housing, improve infrastructure, create functional transit hubs to allow people to disperse a bit while still remaining part of the community, etc.
Are you implying that Arlington does not have a real estate tax based on property value?
Otherwise it seems you are saying that Arlington should arbitrarily seize all profits from landlords because landlords are evil boogiemen.
It's worth noting that under this regime, any actions the landlord does take to increase the value of their particular use of the land is theirs to keep. Build a better apartment building that can demand higher rent? All upside is yours. Build a better storefront that entices higher end tenants? All the upside is yours once again. Seems like capitalist justice to me: you're entitled to what you've produced (value of things on the land) and the community is entitled to what it has produced (value of the land itself).
This feels extremely hand-wavy and borderline wishful thinking. Land value isn’t fully separable from improvements. (My land and improvements are both more valuable when my neighbors improve their properties. My neighbors benefit the same from me. I fail to see why we should be double taxed for the value we create.) Even is separable, it’s not at all clear that landlord profit could be separated this way, because landlords don’t rent out land.
The royal We?
Your comment would read better if you didn't claim to speak for some group - presumably anyone living within a few miles of the HQ2 site. I'm sure that many people could be found there that strongly disagree with your confident predictions:
> We have subsidize part of their expansion, but the growth will pay back that investment in 5-7 years.
... And before tech, video media.
... And before video media, radio.
... And before radio, railroads.
... And before railroads, newspapers.
... And before newspapers, ship captains.
... And before ship captains, cathedrals.
... And before cathedrals, banks.
... And before banks, kings.
If you're the currently atop the economic pyramid, you inevitably splurge on real estate.
[0] https://patch.com/virginia/arlington-va/northern-virginia-co...
Could it be better? Yes but I don’t think it’s better anywhere else.
Markets keep rewarding a behavior/product so nothing is going to change.
Amazon.com is convenient and fast for most people. Kindles are great for most people. AWS is default for most people. 2-day shipping is great for most people.
As long as most people find their products and services preferable, I'm afraid bad PR won't change a thing (see: stock performance )
There are plenty of companies that operate like that. Amazon just chooses not to. As the article pointed out, it's how Bezos rolls, for better or for worse.
For better or worse, Bezos has always been true to himself and his vision for the company. Without any market pressures to dissuade him, he has never lied and pretended to care about anything more than money, status, and further company success.
There is nothing wrong with this. The purpose of government is to set up rules to harness the market so even uncaring monster companies still must do “good” in order to succeed and walk away with money.
If $760 M is fair for HQ2, I don't see a problem if it isn't fair then the onus is on elected officials to explain their decisions.
I see value in Amazon's product and services, why should I care how they operate and whose arms they twist?
If I don't see value in Amazon I am free to buy products and services from other companies.
You are at the top of the world and yet you still need more marbles then anyone around you. But why would you care?
He could have sold Amazon in 1999 and not worked an hour since and still have millions. But that's generally not how these people operate.
Things are fixing to get interesting if Bernie gets the nomination...
As always, Bernie’s plan appears to be “You bet I’ll do it!” and Warren’s plan is “Here is a carefully considered plan for it”. Having watched the Corbyn fiasco unfold, I really hope the Democrats manage to pick someone other than Sanders.
States fighting amongst themselves to give the most generous handouts doesn't ensure national success. Perhaps that makes sense in regards to national tax incentives but not state ones.
Spinning getting divided and conquered and screwed into offering an unfair tax deal just to get Amazon in your state as the key to economic success is some trickle down shit. Why not have solidarity amongst states and tax Amazon fairly? Instead of having to shoot yourself in the foot economically years down the line when you have to adopt costly self-destructive measures to reverse the economic inequality you entrenched for no good actual reason?
I think the fact that tax and regulatory incentives work so well should underscore the importance of keeping taxation and regulation to the minimum necessary. When taxes are high and regulations are too stringent, it can choke an economy.
Mate, I reckon we met that goal long ago.