Why being stiffed by Amazon is a good thing






What a coincidence! Amazon elected to wait until the end of the year before delivering its huge present to some lucky city: the location of its second headquarters (and is there a third HQ in that smiley box, too?)

The fourth quarter is when the e-commerce and cloud giant historically racks up most of its sales. And a big part of Amazon’s hunt for the so-called HQ2 always seemed about generating favorable publicity for the trillion-dollar Godzilla’s monster holiday season.

The whole process, said John Landry, a startup investor from Wayland, was “a stunt to derive incredible amounts of free, Amazon-worshipping ‘advertising.’ They got mayors, pols, and business leaders all juiced up about what Amazon could do for their cities, and in turn Amazon got to hear just what the cities would give up for the mighty, glorious giant to move there.”

Reports are now emerging that Amazon will soon announce it has chosen Crystal City, an office and residential development outside Washington D.C., for its secondary headquarters, along with a second secondary headquarters on the outskirts of New York City. Kudos, Virginia and New York.

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The day after Amazon announced its search in September 2017, I predicted Boston would not get it. So in the meantime, I moved on to the next question, asking people in tech and commercial real estate this: Assuming Amazon doesn’t give the final rose to Boston, why not?


Roy Hirshland, a commercial real estate adviser to tech companies, said one reason Amazon isn’t coming to Boston is “that for a full, integrated headquarters you don’t just need tech talent – which we have — but other types of talent. If you ran the demographics on suburban New York City and D.C., they’ve probably got a deeper pool of people who do stuff other than coding and engineering.”

Choosing D.C. and New York “is a repudiation of all these stories about Silicon Valley getting too expensive, and that there are 20 different cities where you could successfully operate a tech company,” said Greg Bialecki, a principal at the real estate firm Redgate, and a former Massachusetts housing and economic development secretary. The cost of living in D.C. or New York is not notably cheaper than Silicon Valley, he said.

This “doesn’t mean that your startup shouldn’t locate in Nashville,” Bialecki added, “but maybe if you need 10,000 people, it’s still a limited universe of places you can go.”

Diane Hessan picked Washington, D.C., or Northern Virginia in a bet with fellow Harvard Business School alumni. As the owner of The Washington Post, Amazon chief executive Jeff Bezos, she said, “has to be in D.C. anyway . . . and even more, I believe Bezos and his leadership need to be in D.C. more often because of the increasing likelihood of government regulation on Amazon.” Hessan is chairman of the digital market research firm C Space, based in Boston.

But Alec Karys, a startup adviser and investor, who briefly worked for Amazon in 2004, said the Virginia and New York moves “make no sense” to him. He also was “puzzled by the idea of picking one location and growing it to 50,000 people.”

But picking two HQ2 cities, Karys said, suggests that the future Amazon “is going to be a much more distributed organization,” which will include adding jobs in Boston.

And losing HQ2 isn’t a terrible thing for Boston — for many reasons.

“I was afraid if we landed Amazon, they’d take all the oxygen out of the room,” said David Townsend of real estate firm Newmark Knight Frank. The cost of people and office space would spike. “If HQ2 were here, the war for talent goes code red, and I’m not sure that’s a great thing for Boston.”

Tim Rowe, the founder and CEO of the Cambridge Innovation Center, said his impulse is to congratulate the winning city, and then “say that half of me is very pleased that we remain a region of the country that is primarily owned by the little startup guy and idealism.”

Amazon’s reported choice of Cyrstal City (top) and Long Island City ‘is a repudiation of all these ’stories about Silicon Valley getting too expensive, and that there are 20 different cities where you could successfully operate a tech company.’

Venture capitalist Russ Wilcox observed that during the course of the HQ2 search, Amazon said it would lease an additional 400,000 square feet in the Seaport District; picked Boston for a new joint venture to provide more affordable health care to employees; and paid about $1 billion to acquire Pillpack, an online pharmacy based in Somerville.

All those developments — plus losing HQ2 — makes Boston a “double winner,” in Wilcox’s view. We get “a big slice of Amazon’s innovation and development budget, and we do not have to absorb the thousands of lower-paying administrative jobs that would have clogged up our infrastructure and housing.” While those kinds of jobs would be fantastic to have in the future, “we need to add housing and transport first,” added Wilcox, who previously ran the Billerica company E Ink, which supplies screens for Amazon’s Kindle readers.

After the hullabaloo over HQ2 fades, Wilcox said “Boston faces the same strategic challenge we did before: Either become one of the world’s top three cities for innovation or fade into irrelevance.”

I’d love to see some of that innovative energy applied to helping neighborhood businesses and smaller retailers — those most threatened by Amazon’s relentless march — embrace new technology and thrive.

One last thing: Amazon is one of the most insular, secretive, and uncharitable companies I’ve ever encountered. It simply isn’t in its DNA to engage with the local business ecosystem, in either Seattle or Boston — unless there is something obviously in it for Amazon like recruiting employees or persuading software developers to use technologies such as Alexa. Arlington and New York are going to find this out soon, but here in Boston, some people have known it for a while.

Seven years ago, Amazon began building its engineering office in Kendall Square. It now employs several hundred people on the edge of the MIT campus. But while enormous companies such as Facebook, Google, Microsoft, Shell, and Johnson & Johnson all participate in the Kendall Square Association — a nonprofit that focuses on issues such as transportation and diversity — Amazon has never bothered to join.

Scott Kirsner can be reached at [email protected]. Follow him on Twitter @ScottKirsner and on betaboston.com.

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