Amazon CEO Jeff Bezos will address the Economic Club of Washington, D.C., on Thursday night—an appearance that has been hotly anticipated since it was announced earlier this year. Ostensibly, the evening is to celebrate the 32nd year of the non-profit club, which convenes influential businesspeople, entrepreneurs, and policy makers, and calls itself “the premier forum for leaders.” But feverish expectation has surrounded the event for a different reason: Some speculate that Thursday’s address will be one Bezos uses to finally announce the location of Amazon’s much-discussed second headquarters, known as HQ2. Wouldn’t an exclusive event in the nation’s capital, thronged by power brokers, be the perfect venue to announce that Amazon is headed for D.C.?
Both Amazon and the Economic Club have said that no HQ2 announcement will be made during the event. The Washington Post, which Bezos owns, has also tried to quell chatter. But that hasn’t stopped those following the HQ2 horse race from salivating over recent developments that suggest D.C. has emerged as the dominant frontrunner. Amazon’s board of directors flew to Washington this week, enjoying a 40-person dinner on Tuesday night at the Smithsonian’s Renwick Gallery. And Bezos is also slated to visit the Post Friday, though the purpose of his visit is unclear.
These developments come alongside other seeming clues that have tantalized Amazon’s suitors, fans, and detractors. Consider that, last year, Bezos bought the biggest house in Washington—a 27,000-square-foot former textile museum that he’s working to convert into a sprawling private residence, one that includes 11 bedrooms, 25 bathrooms, a huge ballroom, and 191 doors (most of them mahogany and bronze). Or the fact that an article citing the work of an award-winning sustainable architecture firm received a huge traffic spike from Amazon’s internal servers. Or that, in the last two years, Bezos has flown to D.C. more often than he has to any other city but Seattle. Or the ongoing rumor that he is moving to personally buy JBG Smith, one of the D.C. area’s leading developers and largest landowners—an acquisition that would make constructing a 50,000-person corporate headquarters all the more efficient.
Whether or not an announcement is made at Thursday’s event, and hearsay and circumstantial evidence aside, there’s a serious case to be made that Amazon will choose Washington, D.C. as its new home. And a close look at the company’s recent strategy would suggest that outcome is all but assured. Cities like Chicago, Austin, and Denver all have assets to offer, but setting up shop in D.C. would be the smartest, most ruthless move Amazon would make. For my money? Amazon will make the smartest, most ruthless move.
First, look at the fundamentals. The D.C. region doesn’t just satisfy the basic criteria outlined in Amazon’s RFP—a 1 million-person metro area, a high quality of life appealing to talent, good public transit, easy airport access, available land to build on, and the willingness to provide a “business-friendly environment” (read: tax breaks). It’s also the country’s internet capital, with 70 percent of the world’s web traffic flowing through Loudon County, Virginia. Then, there’s the fact that D.C. is the only metro area with three HQ2 semifinalists: Washington, D.C.; Montgomery County, Maryland; and Northern Virginia. That concentration allows Amazon to do another smart, ruthless thing: Release a shorter list of finalists all in one region, and let them compete against each other, one massive tax break at a time.
Ultimately, though, tax breaks won’t sway Amazon’s decision. The company, only the second ever to hit a trillion-dollar market capitalization, doesn’t really need them. Convenience, quality of life, and other ancillary factors aren’t going to seal the deal either. The only question, for any company as smart and ruthless as Amazon, is this: What location will increase our access to money, and to power? Viewed that way, the result of the HQ2 search was probably always a foregone conclusion. Because no city in the world has the ability to increase Amazon’s access to money and power like Washington, D.C.
In recent years, Amazon has become increasingly fixated on policy and the American political establishment. The company has already joined D.C.’s Chamber of Commerce. It has doubled its number of in-house lobbyists, from 14 to 28 since Donald Trump took office, and more than quadrupled its lobbying spending in the last five years. Quietly, its political overtures have become every bit as bold and ambitious as its efforts in retail. As a lobbying animal, “they went from Chihuahua to Great Dane in just a few years,” Bruce Mehlman, a former technology policy official under President George W. Bush, told Bloomberg.
Denver might have clean air and the Rockies. Austin might have barbecue and Whole Foods. But Washington, D.C. has access to the levers of power, and that’s what matters most to Amazon
And why not? Amazon’s early competitive advantage stemmed from its ability to evade existing regulation, using its status as an e-retailer to avoid the taxes paid by brick-and-mortar booksellers. Now that the company is too big to be ignored, it will need to ensure that existing laws don’t rule out its plans to invent the future of retail—a strategy that will demand a strong presence on Capitol Hill. As The New Food Economy’s H. Claire Brown has reported, Amazon is exploring new, strikingly unprecedented ways to sell and move goods, like delivering packages by drone from huge floating warehouses in the sky. That can’t happen unless the laws of the land allow it.
But Amazon’s interest in D.C. isn’t just about lobbying, tech giants, and the rise of Big E-Commerce. Equally important is the way that government contracts have become a foundational part of the company’s business model—and being situated in D.C. would help ensure that Amazon remains in the running for the very biggest.
In September 2016, Amazon hired U.S. Chief Acquisition Officer Anne Rung, who then ran the Office of Management and Budget’s Office of Federal Procurement Policy—the division that determines how the government buys supplies, from pencils and paper to desks and office chairs. Her expertise appears to have been invaluable: Last year, The Intercept pointed out that a buried provision in the National Defense Authorization Act, signed this April by President Trump, stipulated that government procurement officers must prioritize online platforms like Amazon’s to make purchases. Critics say this so-called “Amazon amendment” makes Amazon a de facto supplier to the nation’s largest employer, the federal government—and the $53 billion it spends each year to furnish its offices nationwide.
That’s just the start of it. Amazon is also considered the frontrunner for a $10-billion contract to host all of the Department of Defense’s (DOD) data, a bidding process that has been criticized for including highly technical specifics that appear to give Amazon a competitive advantage. And let’s not forget lucrative aerospace contracts. Jeff Bezos has vowed to invest heavily in his space exploration company, Blue Origin; new, in-progress initiatives, like the “heavy launch” rocket designed to tow and launch satellites into space, seem designed to attract valuable military and commercial deals. This week’s D.C. visit also includes a keynote by Bezos at the Air Force Association’s Air, Space, and Cyber Conference, another signal of the CEO’s future intentions.
The upper, billion-dollar echelon of federal contracts are likely more lucrative than any tax break other cities could provide. And Amazon knows it. That’s why the company hasn’t just focused on winning over consumers to its platform. It’s also working overtime to convince the United States government that Amazon can fulfill its essential duties more cheaply and efficiently than other contractors, or even the government itself. It’s only natural that Bezos would make that bold, potentially transformative argument from the nation’s capital. Denver might have clean air and the Rockies. Austin might have barbecue and Whole Foods. But Washington, D.C. has access to the levers of power, and that’s what matters most.
Amazon, of course, is free to do whatever it wants, and only time will tell where its massive new headquarters will be built. But a lesson from the company’s past might tell us something about its future. It goes all the way back to 1994, when Jeff Bezos settled on Amazon’s original home, Seattle—a choice that has transformed the city, for better or for worse. Bezos didn’t pick Seattle because he liked the music. Or its coffee. Or its airport. He picked it, as he told Fast Company in 1996, because its regulations then stipulated that e-commerce companies only had to pay sales tax on goods shipped to residents of their state. Low-population Washington state, in that case, made much more sense than California or New York. (Though Bezos joked that he would have started the company on an Indian reservation if he could.)
In other words, Amazon’s CEO found a way to work the system—to cannily flaunt policy and regulations, and operate so that the existing rules served him above the competition. This approach has been in Amazon’s DNA from the beginning.
It’s always going to be where Bezos feels most at home.
The post Jeff Bezos may announce an HQ2 finalist tonight. But Amazon is headed to Washington, D.C. either way appeared first on New Food Economy.
Go to Source
Author: Joe Fassler