What Can Other Companies Learn From Amazon’s NYC Debacle?
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. Then they announced the winner. And everything fell apart.
If Amazon can make this many political mistakes, anyone could. But it doesn’t have to be this 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 is now slowly backing 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 Mike Gianaris, the local State Senator was both adamantly opposed and had just become one of the most powerful people in Albany (in fact, yesterday, he was named as the Senate’s representative to Public Authorities Control Board, which gives him veto power over the project). They even somehow managed to miss the fact that their new facility is within spitting distance of Alexandria Ocasio Cortez’s district. Ocasio Cortez is 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 self-aware and 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 the wrong impression from Cuomo and de Blasio, but their responsibility to make the right choice goes far 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 week’s New York City Council hearing, 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. And there’s no way Amazon could have rationally thought through the local politics and not expected unionization to be a major 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 doesn't give Amazon strength. It makes them 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. If they didn’t have the talent in-house to understand these issues on the front end, they’re hiring the wrong people.
Amazon can’t take back their bad decisions. And if you have to bet, odds are, they still work something out and come to New York. 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.