Amazon's amateurish NYC debacle: Why everything fell apart
They’re probably the most successful, diversified, forward-thinking company in the world. Their years-long national competition for HQ2 was widely hailed as stroke of political genius.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AMZN | AMAZON.COM INC. | 201.45 | +4.33 | +2.20% |
Then they announced the winner. And everything fell apart. If Amazon can make this many mistakes, so could anyone. But it doesn’t have to be that way. So what can other companies learn from this debacle?
Know who you’re dealing with.
In this case, Amazon mainly negotiated with New York’s governor, Andrew Cuomo. Cuomo is a very smart, very powerful politician, but he only has authority over the executive branch of state government. He has no authority over the state legislature, the City Council, the congressional delegation or anyone else. Amazon’s mistake was taking Cuomo’s word for it that everyone would be supportive, rather than finding out for themselves.
Most politicians hate each other. They’re not going to support something just because the governor tells them to. Cuomo works towards his own ends, in this case, being able to secure and leak news of the deal before his election. That doesn’t bring along support from anyone else. As Amazon is now painfully learning, not understanding the actual power structure can be fatal.
Figure out the zeitgeist.
Most democratic cities and states are in the midst of an overwhelming wave of progressive enthusiasm. The single-issue progressives care most about is not allowing big corporations to benefit at the expense of regular people. When the richest company in the world receives a $3 billion incentive package from a city and state that can’t afford to fix its subways or provide decent affordable housing, it’s not going to go over well.
Yes, New York City Mayor Bill de Blasio signed onto the deal and presents himself as the leader of the progressive movement, so maybe that confused Amazon. But relying on one politician’s assertion in the face of all evidence suggesting otherwise was incredibly naïve (and even de Blasio slowly backed away from the deal in the face of massive progressive opposition). It’s the company’s job to understand what’s actually happening on the ground.
Do your diligence.
Amazon did not talk to local community leaders in Long Island City before the selection announcement. Amazon didn’t talk to local elected officials. They didn’t notice that the local state senator was both adamantly opposed and had just become one of the most powerful people in Albany.
They even somehow managed to miss the fact that half of their new facility would be located in the district of Alexandria Ocasio Cortez, currently the most high profile progressive, anti-corporate politician in Congress. If you had to make a list of all 435 congressional districts and pick the single one whose representative would dislike the deal and have the platform and power to possibly derail it, this would be it. Taking a little more time, doing a little more homework, and being a little more humble would have gone a long way.
Every city is not the same.
Hundreds of cities across the nation applied to host HQ2. The vast majority of them would have thrown roses at Jeff Bezos’ feet if he’d selected them. But New York City is not Indianapolis. Assuming that everyone in every city feels exactly the same way is a big mistake.
While New York would benefit from hosting Amazon, it doesn’t need Amazon. Google has created thousands of jobs here without receiving a penny in tax incentives. Companies come to New York because they want access to the talent pool, not because they get paid off by the city and state to be here. Amazon probably got a different impression from Cuomo and de Blasio, but their responsibility to make the right choice goes deeper than checking a few boxes. Understanding leverage is a key to politics. Amazon somehow missed that.
Foresee the issues coming at you.
In last month’s hearing in the New York City Council, Amazon refused to support unionization of its workers. From a business standpoint, that’s a perfectly fine position. From a political standpoint, it’s a disaster.
There’s no way Amazon could have rationally thought through the economics of each bid and not expected unionization and all of the extra costs it entails. And there’s no way Amazon could have rationally thought through the local politics and expected unionization to not be an issue.
De Blasio was elected by the unions. The City Council answers to the unions. State government is no different. To choose New York, then refuse to accept unionization and then tacitly threaten to leave only makes Amazon look like a bunch of amateurs. They should have seen this coming and either decided the economic model still worked with unionization or picked somewhere else.
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Amazon can’t take back their bad decisions. They made a series of wrong choices and now they’re locked out of New York because of it. But that doesn’t mean other companies have to make the same mistakes. The full story of Amazon in New York is yet to be written, but there’s already more than enough for others to learn from – and get right the next time.
Bradley Tusk is a venture capitalist who protects startups from political risk. He is the CEO and founder of Tusk Ventures, the first venture capital fund dedicated to working with and investing in startups in regulated industries. His fund, Tusk Ventures, has now worked with and invested in dozens of startups like Bird, FanDuel, Lemonade, Eaze, Circle and Ripple. Bradley previously served as Mayor Bloomberg’s campaign manager in New York City, Deputy Governor of Illinois, and Senator Chuck Schumer’s communications director.
An earlier version of this column first appeared in Tusk Venture’s blog “Firewall.”
