Amazon Unbound

by Brad Stone

  At the same time, another factor weighed heavily on Bezos’s long-term plans: even as Amazon built new offices, it was running out of space in Seattle. By 2018, thousands of new hires were joining the company each month. Employees working in office buildings like Doppler and Day 1 recalled that the offices were so cramped, coworkers were sometimes given desks in hallways. Company events were packed, and that year was the first that Amazon wasn’t able to hold the annual summer picnic at CenturyLink Field. Now there were simply too many employees.

  Recruiting was also becoming more difficult. The company was exhausting the number of people—engineers, but also lawyers, economists, and human resource executives—it could convince to move to the escarpment of fog and rain clouds that hung over the Pacific Northwest. For its next phase of growth, Amazon was going to have to look elsewhere.

  A white paper produced in August 2016 had considered this inevitability. The paper, with the verbose title “Real Estate Site Selection Initiative Update, Site Selection for Amazon North America Campus,” was written by executives on Amazon’s economic development team. It outlined the relative merits and available tech talent of twenty-five cities, including Dallas, New York, and Washington, D.C., where Amazon might locate around twenty thousand employees and enjoy the efficiencies of a large satellite office.

  The document and subsequent S-team discussion were the first step down a provocative new path—mitigating Amazon’s dependence on its hometown. A year later, in September 2017, stunned Seattle officials would learn about Amazon’s quest to develop a second headquarters in the media, along with everybody else.

  * * *

  By all accounts, the process that would come to be known as HQ2 was Bezos’s brainchild. Amazon’s founder had noticed when Washington State authorized a package of incentives worth $8.7 billion to entice Boeing to build its wide-body 777X aircraft in the state. He observed when Elon Musk magically dubbed Tesla’s planned lithium-ion battery plant a “Gigafactory,” then pitted seven states against one another before selecting a site east of Reno, Nevada, and receiving a tax relief package worth $1.3 billion. Musk was personally involved in the search, deploying his singular charisma in meetings with governors and tours of prospective sites. By the end of the process, Nevada had offered Tesla the biggest tax relief package in the state’s history and allowed it to operate there practically tax-free for a decade.

  To its credit, Amazon never asked for or received tax relief from Seattle or the state of Washington. But now Bezos concluded that Amazon, with its high-paying jobs and reputation as an innovator, should also be able to secure a large incentive package from a similarly business-friendly region. Amazon’s economic development team was instructed to “find us a durable advantage”—not just cash grants that the company might burn through quickly, but a city that might be willing to offer them exclusive and enduring tax relief.

  As usual, Bezos’s standards were high and patience was thin. When Amazon secured $40 million in tax incentives in January 2017, for example, to lease an air hub at Cincinnati/Northern Kentucky International Airport for fifty years, Bezos fired off a disappointed email wondering why Musk had a special “superpower” of amassing tax breaks. And as the Wall Street Journal later reported, Amazon’s economic development team was assigned an S-team goal that year to amass $1 billion in annual tax incentives.

  The boldest idea for how to attract such tax relief ended up coming from Bezos himself. Over the summer of 2017, he processed the conclusions of the previous year’s white paper from the economic development team, the shifting political sentiment in Seattle, and the outsized success that Tesla, Boeing, and Taiwanese manufacturer Foxconn were having in securing tax breaks from state and local governments. And he produced a very Bezosian idea—novel in its complete inversion of the traditional ways that corporations courted localities.

  Instead of developing numerous offices in multiple cities, or negotiating privately with one location for a satellite office, Amazon would announce its intention to create a second headquarters—an equal to its home in Seattle. It would then open the site selection process to all cities in North America and allow them to compete for a prize of some fifty thousand jobs and $5 billion in capital investments over a span of fifteen years. Such a process, Bezos argued, could highlight what communities coveted from the company instead of what its critics feared about it. “Part of it was a cheerleading exercise,” said a member of the HQ2 team, who like many others involved, declined to speak on the record for fear of retribution. “Who wanted us? That would come through in the process itself.”

  To kick off the project, members of the public affairs and economic development teams drafted a six-page document, much of which was reflected in the press release and HQ2 RFP (request for proposal) that Amazon made public on September 7, 2017. In addition to outlining the company’s preference for a metropolitan area of more than 1 million residents, with a business-friendly environment and access to strong talent and transportation networks, the RFP pointedly described what it would take to win the competition: it used the word “incentive” or “incentives” twenty-one times and said that forms of tax relief “will be significant factors in the decision-making process” and that a competitive offer might even require regions to pass special legislation.

  The direct language struck some as distasteful. After its release, Mike Grella, a D.C.-based member of Amazon’s economic development team who worked on securing locations for AWS data centers, started fielding calls from city officials he knew around the country. They were alarmed by the RFP and the very notion of a private process that Amazon was going to conduct out in the open, where it would be subject to unpredictable political forces and public opinion.

  But then a funny thing happened. “They were all outraged,” Grella said. “And then they fell into line.”

  * * *

  The announcement of Amazon’s HQ2 initiative sparked a media frenzy. In the two weeks after the announcement, media outlets disgorged more than eight hundred articles and opinion pieces on the contest, according to the database LexisNexis. Local newspapers handicapped their city’s chances and veteran Amazon watchers placed bets. The New York Times predicted Denver would win, citing “the city’s lifestyle and affordability, coupled with the supply of tech talent from nearby universities.” The Wall Street Journal picked Dallas. Amazon execs favored Boston, Bloomberg News reported.

  There were a few dissenting voices. Silicon Valley congressman Ro Khanna tweeted that tech companies shouldn’t “be asking for tax breaks from cities within my district or those outside. They should be investing in communities.” A Los Angeles Times columnist called the process “arrogant, naive and more than a teensy bit cynical.” But as Bezos had hoped, the overall response was positive and clarifying. While tech-industry critics in Seattle and Silicon Valley were questioning the tech giants’ role in accelerating gentrification and homelessness, other cities were desperate to host them. The result was an unprecedented public scrum for a once-in-a-generation bounty of high-paying jobs and much needed economic activity.

  In all, 238 proposals were submitted by the October 19, 2017, deadline. Cities like Detroit, Boston, and Pittsburgh added videos to their applications, touting their charms with soaring music and iMovie-quality special effects. A video produced by the Tampa–St. Petersburg region featured a shot of beach volleyball players frolicking in the sand; Dallas flaunted, among other things, its “flavor,” “vibe,” and “margaritas.” Unphotogenic city officials wearing suits and ties sidled up to the camera and spoke directly to Amazon in submissive tones.

  A few cities resorted to more peculiar measures. Birmingham, Alabama, staged three giant cardboard boxes around town and asked residents to take selfies with them and post the photos to social media. Kansas City’s mayor bought a thousand products on Amazon.com and had each reviewed using superlatives about the town. Calgary, Canada, tagged the sidewalks in Seattle with graffiti and hung a two-hundred-foot-long red banner near Am
azon’s offices that read, “Not saying we’d fight a bear for you… but we totally would.” Stonecrest, Georgia, a suburb twenty miles east of Atlanta, offered to rename itself “Amazon.” Tucson, Arizona (2019 population: 545,000), tried to send a twenty-one-foot saguaro cactus to the company, which donated it to a museum. And on and on.

  Many city officials said they had no choice but to show their constituents they were vying for such a lucrative prize. “In my personal opinion, the future of work is all about technology and if you are not a participant in some way, your economy will be completely left behind,” said Ryan Smith, a director in the Nevada Governor’s Office of Economic Development, who worked on Las Vegas’s futile bid.

  The applications were routed to a small team of about half a dozen HR, PR, public policy, and economic development executives in Amazon’s Seattle and Washington, D.C., offices. For years Amazon’s presence in the nation’s capital had been negligible. The policy team once occupied a single floor in a run-down D.C. row house, over an office occupied by a pair of lobbyists for the Cherokee Nation. Employees shared a single bathroom and had to use a VPN to access Amazon’s network. Such was the extent of Amazon’s commitment to government relations that Jay Carney, when he worked for the Obama administration, said he “never met anybody from Amazon, not once, even when we went out to Seattle to do fundraisers.”

  After Carney joined Amazon as senior vice president of global corporate affairs in 2015, the D.C. team started reporting directly to him and getting more resources. Amazon had just moved to a modern office building at 601 New Jersey Avenue, across the street from the Georgetown University Law Center. The company was now attracting plenty of government attention; it could no longer hide in plain sight.

  While Carney was based in D.C., he traveled frequently to Seattle, so the office was run by Brian Huseman, a vice president of public policy and former Department of Justice prosecutor. Huseman, a native Oklahoman, was a polarizing figure in the office, known by colleagues as an adept player of internal politics. In the fall of 2017, as the HQ2 process started, he carefully planned Amazon’s presence at a black-tie ceremony in D.C., where Bezos received the National Equality Award from the Human Rights Campaign. Huseman also designed the interior of Amazon’s ninth-floor offices, so that the elevators opened to a reception area framed by a wall of old door desks—a symbol of Amazon frugality. Down one hallway was a public event space adorned with a Kiva robot, a prototype package-delivery drone, and video screens that rotated clips from Amazon Studios productions. Down another and behind a set of turnstiles were the spare, Amazon-style offices. One of those rooms required a special key to open and was reserved for the HQ2 team to conduct their secretive work. Newspapers covered the windows; if anybody was caught peeking inside, they were reported to security.

  In the weeks after the initial HQ2 bids were submitted, the D.C. team put in twelve-hour days, six to seven days a week, reviewing the inundation of applications. At one point, the process risked turning dangerously arbitrary, until a member of the group reminded his colleagues that they needed to develop objective criteria and deliver all available data to the S-team. They returned to the RFP and created spreadsheets weighing different factors, like population, the number of local STEM graduates, employment rates, and regional GDP.

  Idealism largely pervaded the effort. Members of the HQ2 team earnestly believed that any city had an opportunity to win. At one point, they put their predictions for the finalist cities on pieces of paper and sealed them in an envelope. Holly Sullivan, Amazon’s eloquent and well-connected economic development director, came closest to guessing the outcome. “We genuinely thought we were working on the most important economic development project in a generation and were going to change the lives of hundreds of thousands of people,” said one of the HQ2 employees.

  In early January, Sullivan and finance director Bill Crow presented all of the data and applications to the S-team. Colleagues say Bezos, cognizant of the responsibility of giving every candidate a sincere look, read through the applications of all 238 regions. The review lasted for hours.

  As they prepared to announce the twenty finalists on January 18, 2018, employees working on the HQ2 project submitted various proposals for how to unveil the short list. One idea from the public relations team was to amplify the suspense by revealing a new city every hour, but Bezos vetoed that idea. Perhaps he recognized that Amazon didn’t need to do anything more to augment the considerable public relations exposure that HQ2 was generating all on its own—or that the political winds gusting around the process were already too unpredictable.

  In the days before the finalists were announced, the HQ2 team divided the list of more than two hundred cities that hadn’t made the cut and placed phone calls to local officials, alerting them to the bad news. Most asked why, while expressing disappointment with the amount of time and resources they had put into the failed effort. Amazon employees responded with blasts of data. “Your metro area only has 375,000 people and of those only 10 percent have advanced degrees,” went a typical explanation. “Sorry, that’s not enough of a labor pipeline.” City officials mostly agreed that Amazon’s outreach was conscientious, and that Holly Sullivan in particular spent more time than she needed answering questions and preserving relationships that might be helpful to the company in the future.

  After Amazon announced the short list, generating another fourteen hundred news stories that week alone, the HQ2 team hit the road. A group of a dozen employees led by Sullivan and John Schoettler, the real estate chief, traveled nearly nonstop from February to the end of April, barnstorming cities in three separate trips to the West Coast, the South, and the East Coast, with only a few weeks of downtime between outings. They traveled, Amazon-style, in coach on commercial airplanes or on buses, starting early in the morning and ending late at night.

  Cities were alerted to their visits a few days beforehand and given little guidance, other than that Amazon wanted to tour their proposed sites and hear about the city’s talent pool and education systems. Some did a better job preparing than others. L.A. mayor Eric Garcetti impressed the Amazon entourage with a dynamic presentation and breakfast with the presidents of local universities. In Nashville, Amazon execs met with local musicians. In Dallas, city officials took the group on the scenic M-Line trolley downtown and to dinner at a country western restaurant in the hip Uptown neighborhood. “The Amazon team was very genuine” in their interest, said Mike Rosa, senior vice president at the Dallas Regional Chamber. “Some of the people writing the articles about ‘it was all a sham’ weren’t in the room I was in. They were as genuine as any project I’ve ever worked on.”

  From Seattle, Bezos stayed interested and involved, though unlike Elon Musk with the Gigafactory, he remained well behind the front lines. HQ2 was stirring a media tempest all on its own, and he didn’t want his own visibility—and the optics of his enormous wealth—to divert from the preferred focus on job creation and community investment. Colleagues said that Sullivan would get frequent emails from Bezos and other S-team members, asking for details of site visits and city proposals. On one trip to Seattle, she sat with Bezos on the sixth floor of Day 1 tower, waiting in tense silence to answer his questions while he flipped through binders of applications.

  For Bezos, the HQ2 search was not only the subject of pressing interest for the future of his company but a PR spectacle that was now casting a large shadow over most of his public appearances. That April, he traveled to Dallas to speak at the George W. Bush Presidential Center’s Forum on Leadership at Southern Methodist University. At the cocktail party afterward, Dallas mayor Mike Rawlings walked up to him and went for it, saying, “Look, we’re the right place for you.” Bezos was coy and said only that he had heard great things about the city from friends who lived there. “I felt a shyness from him that didn’t make me feel great,” Rawlings later told me.

  The team completed their visits that month and prepared a six-page paper for the S-team with the
ir results and recommendations. I viewed that paper, along with two other key HQ2 documents, during the course of my research. Prepared in June 2018, this first paper broke the twenty finalists into three groups: “not viable,” “hotly debated,” and “top tier.”

  Austin, Columbus, Denver, Indianapolis, Miami, Montgomery County in Maryland, Newark, and Pittsburgh were all cast in the first category and dismissed, largely because they were too small and did not have the required infrastructure and talent. In addition, the team had concluded from their visits and from analyzing public sentiment that Austin and Denver might be hostile to Amazon’s presence. “It was clear from our visits that Austin and Denver were not as supportive of the project as other sites,” they wrote. Pittsburgh was “still recovering from economic hardships.” Newark was flatly rejected because talented engineers from New York City “would not want to work there.”

  Atlanta, Boston, Los Angeles, Nashville, Toronto, and Washington, D.C., were listed in the “hotly debated” category. The HQ2 group cited high costs and high taxes as negatives for Boston and Toronto. They described the traffic congestion of Atlanta as problematic, as well as a recent move by the Georgia legislature to kill a tax exemption for Delta Air Lines’ jet fuel purchases because of the airline’s controversial decision to end discounts for National Rifle Association members after the school shooting in Parkland, Florida. To Amazon, the state’s move to penalize a company for its political values was troubling.

  The document also stated: “We all had high expectations of Nashville, but the city isn’t ready for an investment of our size.” Of Los Angeles, it opined: “It is the world’s most congested city, does not provide geographic diversity and California is not a business-friendly state.”