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'A Major Distraction': Is A Megadeal Like Amazon's HQ2 Always Worth It?
Thursday marks the deadline for bids in Amazon's highly publicized search for the location of its second headquarters, dubbed HQ2. Cities are clamoring to land the conglomerate's project and its unparalleled promise of up to 50,000 jobs paying an average of $100,000, at one of the world's fastest-growing companies.
But with that comes some public soul-searching: How much should a city or state subsidize a wealthy American corporation in exchange for such a shiny promise? [...] Financial incentives are among numerous criteria Amazon included in its solicitation of bids. [...] By multiple estimates, Amazon has already cashed in on more than $1 billion in taxpayer-funded subsidies and incentives for its warehouses, data centers and other operations.
[...] "I often thought, as governor, it would be sort of nice, if all the governors just got together and said, 'Look, we're just not going to play this anymore,' " says former Wisconsin Gov. Jim Doyle. Doyle was at the helm during the financial crisis in 2008, when General Motors shuttered plants, including a factory in Janesville, Wis. But later, the automaker said it would reopen one location, bringing back the jobs. Wisconsin put together its largest incentive package yet — Doyle says he felt an obligation to — but it lost to Michigan's even bigger offer. [...] Since then, Wisconsin has become infamous for its eye-popping $3-billion financial incentive to get a Foxconn liquid-crystal display plant.
Previously: Amazon to Invest $5 Billion in Second HQ Outside of Seattle
Cities Desperate to Become the Location of Amazon's "Second Headquarters"
(Score: 2) by DeathMonkey on Thursday October 19 2017, @09:22PM (2 children)
Almost nothing is always anything.
(Score: 3, Insightful) by NewNic on Thursday October 19 2017, @09:28PM
Betteridge wins again.
lib·er·tar·i·an·ism ˌlibərˈterēənizəm/ noun: Magical thinking that useful idiots mistake for serious political theory
(Score: 0) by Anonymous Coward on Friday October 20 2017, @02:05PM
I think I found a new favorite saying!
(Score: 2) by frojack on Thursday October 19 2017, @09:29PM (1 child)
Its all about the custom negotiated narrowly written tax breaks.
Outlaw THAT and a lot of this nonsense goes away.
https://jeffreifman.com/2016/05/05/forget-boeing-microsofts-tax-break-costs-776-million/ [jeffreifman.com]
No, you are mistaken. I've always had this sig.
(Score: 2) by JoeMerchant on Monday October 23 2017, @02:26PM
Laws to prevent laws - that seems like a good start.
🌻🌻 [google.com]
(Score: 4, Insightful) by mhajicek on Thursday October 19 2017, @09:29PM (4 children)
Up to 50000 jobs includes zero jobs. Everyone knows Amazon is all about automation; they'll get the job done with the fewest employees possible, and the number of employees will likely peak soon and then diminish over time as they get better with automation.
The spacelike surfaces of time foliations can have a cusp at the surface of discontinuity. - P. Hajicek
(Score: 2) by arslan on Thursday October 19 2017, @09:58PM (3 children)
Ummm this is HQ v2.0 not a warehouse or branch. Also last I check we can't build a giant campus with pure automation, so there's gonna be lots of one-off jobs to build it. After that there gonna be lots of men/women in suits since they've not offshored or robotize the PHBs yet and probably quite some knowledge workers. I also doubt they have robots cleaning the shit stains of the loo yet, so yea lots of blue collar jobs.
Is it 50,000? No idea, but definitely not zero or a low amount given it is HQ2. As for the answer to the headline is it worth it? Well yes, if you play your cards right like in any deal, offer more than what you'll get in return then you get burned like any other business deal.
Likely hood of Politicians getting a good business deal for the folks they represent? Very low. Likely hood of Politicians getting some side benefits off of massive tenders regardless of outcome? Very high. The likely hood of the folks they represent getting screwed? Almost certainly.
(Score: 1, Insightful) by Anonymous Coward on Thursday October 19 2017, @11:13PM (2 children)
Whatever the final number of employees Amazon brings in, everyone is either ignoring, or unaware of, the fact that the hosting economy will have about 3 jobs created for every one that Amazon brings in. So, even if they only bring in 10,000 Amazon jobs, there will be 30,000 supporting jobs created in that community . . .
(Score: 1, Funny) by Anonymous Coward on Friday October 20 2017, @12:06AM (1 child)
Those numbers are being pulled from somewhere, and I bet there isn't much light around.
(Score: 0) by Anonymous Coward on Friday October 20 2017, @09:01PM
https://en.wikipedia.org/wiki/Local_multiplier_effect [wikipedia.org]
OK, 2.5. I rounded up.
(Score: 0) by Anonymous Coward on Thursday October 19 2017, @09:36PM (1 child)
Dupe
(Score: 2) by takyon on Thursday October 19 2017, @11:58PM
1: http://www.npr.org/2017/10/16/557567180/cities-dream-of-landing-amazons-new-hq-and-they-re-going-to-great-lengths-to-sho [npr.org]
2: http://www.npr.org/2017/10/18/556958482/a-major-distraction-is-a-mega-deal-like-amazon-s-hq2-always-worth-it [npr.org]
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 1) by Sulla on Thursday October 19 2017, @09:42PM (25 children)
Amazon's dominance will have a negative effect in the long run on retail jobs. If you want to combat your future lost in retail you could net that by having Amazon. Someone has to not lose, whoever wins loses less than the rest. So with Amazon you might not get extra taxes from them, but you don't lose taxes from 5k retail workers.
Ceterum censeo Sinae esse delendam
(Score: 2, Insightful) by Anonymous Coward on Thursday October 19 2017, @10:12PM (21 children)
Sears dominance will have a negative effect in the long run on retail jobs. If you want to combat your future lost in retail you could net that by having Sears. Someone has to not lose, whoever wins loses less than the rest. So with Sears you might not get extra taxes from them, but you don't lose taxes from 5k retail workers.
Sears one time was considered the Amazon of its day. There was a point in time when Sears had 0 stores yet had a huge catalog. You could buy just about everything from them (including houses).
Amazon is moving into the retail space. Watch for them to follow in Sears footsteps.
(Score: 4, Interesting) by Grishnakh on Thursday October 19 2017, @11:20PM (19 children)
Watch for them to follow in Sears footsteps.
Into bankruptcy? It took Sears a long time to get to that point (and they're still alive and kicking now, though I'm not sure how, just like with RadioShack). It'll probably be a long time before this happens to Amazon, though you never know.
Personally, I use Amazon a lot for just looking for stuff, and maybe reading reviews, but I end up buying elsewhere. Their prices just aren't very good any more. And too much stuff is shipped straight from China, but at much higher prices than the exact same thing on Aliexpress.
(Score: 4, Interesting) by Snotnose on Thursday October 19 2017, @11:36PM (11 children)
It's cuz Eddie is sucking all possible value out of Sears before he lets it die. He makes shadow companies, then transfers Sears assets to them leaving debt in their wake. Repeat, repeat, repeat.
People like Eddie Lamport need to be regulated out of existence, they are nothing but leeches on the economy.
When the dust settled America realized it was saved by a porn star.
(Score: 2) by Grishnakh on Friday October 20 2017, @12:42AM (9 children)
Ok, but how is he a "leech on the economy"? I'm not sure I get this one. He's a leech on Sears, true, but he's the CEO there because the board of directors chose him, right? And the board is elected by the shareholders, right? So we can assume that the shareholders want him as CEO. If he's leeching on anyone, wouldn't it just be Sears shareholders? Why should the rest of us give two shits about them? It's just one company; if they want to drive their company into the ground, that's their problem. Obviously, it's a bad thing if lots of companies are being mismanaged all at once, so I can understand the call for a certain amount of regulation to avoid the economic effects of too many robber-barons doing too much too quickly, but for this case I'm not too broken up about it: there's a bunch of companies that are taking over and doing very well, namely Amazon, but also other online retailers. It's quite possible that Sears would be collapsing even with the most capable CEO in the world; they're just obsolete, and their brand name hasn't been worth much in a very long time, with all the competition they've gotten from many other places (better mall retailers like Macy's, discount big-box stores like Walmart and Target, Harbor Freight for tools, and of course all the online sellers now).
(Score: 4, Interesting) by Snotnose on Friday October 20 2017, @12:53AM (2 children)
Because people like him (*cough* Mitt Romney *cough*) have been doing this shit for a couple decades now, and they all look to see what works to suck their next company dry.
This financial manipulation is bullshit and the people involved need to go to prison.
When the dust settled America realized it was saved by a porn star.
(Score: 1) by toddestan on Sunday October 22 2017, @04:34PM (1 child)
That's basically it. It's a transfer of wealth from small investors, like your average worker who owns a small piece of Sears as part of their 401k, to the urtra-rich like Mitt Romney.
(Score: 2) by JoeMerchant on Monday October 23 2017, @05:21PM
Hollywood was all over this in the 1980s, Danny DeVito in Other People's Money comes to mind, but there were dozens of big movies about it. It hasn't gotten any better since then.
🌻🌻 [google.com]
(Score: 2) by JoeMerchant on Monday October 23 2017, @05:30PM (5 children)
Do you invest in mutual funds, or do you manage a portfolio full of individual stocks?
If you don't spend multiple hours per week managing your portfolio, that answer should include at least some mutual funds, or you're living with lots of risk.
So, now if you do have mutual funds, have you dug into what each of them contains? For most investors the answer is: no. There's not usually even an easy way to determine your exposure to Sears, much less all the pies that Eddie has his fingers in. You trust your fund managers to try to make gains commensurate with a certain level of risk in your portfolio, but in the end the top fund managers don't outperform a bunch of monkeys on a consistent basis.
So, while your fund manager holds some Sears, and Eddie siphons off value from Sears into other companies you can't even invest in, are you pissed off if that missing value impacts your fund performance because the quarterly report came up short? Probably not, because it's all hidden from you.
If there were only a couple of Eddies in the world, it would just be part of the cost of doing business, but there are so many of these operations in existence, it's impacting an enormous number of people's lives in a negative ways, small and large, and boosting these people's fortunes dramatically.
It's the kind of thing that a democracy, government by the majority, is supposed to be able to reverse. But: they don't really educate children in this country about the true difference between a democracy and the United States system of government until they're 20+ years old, if ever.
🌻🌻 [google.com]
(Score: 2) by Grishnakh on Monday October 23 2017, @05:41PM (4 children)
You trust your fund managers to try to make gains commensurate with a certain level of risk in your portfolio, but in the end the top fund managers don't outperform a bunch of monkeys on a consistent basis.
Your whole argument seems to be based on this. Citation? Surely decent fund managers would understand this stuff (since some internet randos seem to), and divest any stock from companies being run this way.
(Score: 2) by JoeMerchant on Monday October 23 2017, @08:16PM (3 children)
How do you evaluate the managers of mutual funds you invest in? I mean, there's the profile they post in the prospectus, years in management, track record, etc. Do you really know them better than an internet rando before you invest with them? If you do, you're rare.
Also, as for divesting from companies being run this way, you would think that such divestments would be easily noticed on the stock price history: a huge dip on the day that people become aware of parasitic ownership, accompanied by press releases explaining the reason for the huge dip. Instead, we get bigger movement when some Wall Street rando publishes a downgrade on their buy/sell rating, often based on sketchy research from months earlier.
🌻🌻 [google.com]
(Score: 2) by Grishnakh on Monday October 23 2017, @09:51PM (2 children)
How do you evaluate the managers of mutual funds you invest in? I mean, there's the profile they post in the prospectus, years in management, track record, etc.
That's basically it; how else would you evaluate them? The track record should be sufficient. If they've consistently performed well, then that would seem to show competent management, right?
(Score: 2) by JoeMerchant on Monday October 23 2017, @11:49PM (1 child)
that they haven't done anything particularly bone-headed, yet.
Past performance is no guarantee of future returns, or anything at all really.
🌻🌻 [google.com]
(Score: 2) by Grishnakh on Tuesday October 24 2017, @01:28AM
No, you can't guarantee anything in the future, but past performance is an indicator of some degree of competence usually. It's a lot better to choose someone who's performed well in the past over someone who's performed poorly.
(Score: 2) by JoeMerchant on Monday October 23 2017, @05:18PM
Who benefits from Eddie's value extraction from the Sears carcass? Think of the yacht builders who would be out of business if Eddie and his kind didn't concentrate wealth like they do. Crashing high-end real-estate values, luxury car dealerships out of business, all kinds of boot licking service jobs just gone. Those people who are put out of work by the closing Sears stores, a good 1% of them can find new work in the luxury support sectors, and isn't that what really matters? /s
🌻🌻 [google.com]
(Score: 2) by JoeMerchant on Friday October 20 2017, @03:39PM (6 children)
Not sure what "much higher" is, but with Amazon there is some modicum of customer support / vendor vetting that isn't there on Aliexpress.
If, for instance, I was buying an e-bike motor, and I could get it on Amazon for $700 or likely the same thing on Aliexpress for $500 - I _might_ just use Amazon for the warm fuzzy of thinking that they care if I get burned on this deal or not and therefore I'm less likely to end up unhappy with the purchase.
If I was buying 100 e-bike motors and could do some test purchases and direct negotiation with the vendor, I'd definitely choose the Aliexpress route, or possibly just direct vendor dealing if they're interested in that for a $50K deal.
🌻🌻 [google.com]
(Score: 2) by Grishnakh on Friday October 20 2017, @04:43PM (1 child)
Aliexpress isn't for buying 100 e-bike motors, it's for buying small quantities. It's an alternative to buying the exact same thing on Ebay or Amazon from the same Chinese seller, or buying the exact same thing from some guy in the US who bought a container of such things and is reselling them. If you're looking to buy stuff in bulk and resell it, you usually go to Alibaba.com.
Honestly, I haven't seen much on Amazon as for as "vendor vetting". They'll let anyone sell on there, no questions asked. There's countless fly-by-night sellers on there that I've seen that are selling cheap Chinese stuff one month, and disappeared the next. I'm sorry, I just don't buy this idea that Amazon has customer service worth paying extra for. Aliexpress has built-in dispute resolution stuff too; I haven't had to use it yet, but I don't see how it could be any worse than Amazon's or Ebay's. The thing that's nice about Aliexpress (and also Ebay) is that it's very clear where the seller is located. Amazon hides this completely; you can only tell by looking at the shipping time on the checkout page after you've gone through all the trouble of going through the checkout process. If you want to specifically avoid Chinese vendors in a product search, it's impossible. On Ebay, you just click "North America only" or "US only". On Aliexpress, you just don't use the site.
(Score: 2) by JoeMerchant on Friday October 20 2017, @09:02PM
I suppose Amazon has "bought some loyalty" from me by instantly reverting all the e-purchases my kids have made on the Kindle... I've never really had a vendor dispute through Amazon yet, so that's another source of my confidence. I assume both Amazon and Aliexpress have extensive "how we help you if there's a problem" written policies, but I _feel_ like Amazon might have something to lose if I walk away as a customer, Aliexpress not so much.
EBay and I had a problem back in the 1990s, I walked away from eBay and didn't look back for 20+ years - I think I might have bought 2 things through eBay in the past 5 years, and nothing in the 20 years before that. Before the problem, I was starting to become a habitual customer, 2-3 transactions per month on average. I'm sure I'm not the only one, just as I'm sure there's not enough of us to sink eBay, but there are enough to reduce their profits.
🌻🌻 [google.com]
(Score: 2) by urza9814 on Monday October 23 2017, @12:28PM (3 children)
I've bought stuff on Amazon before and had it never show up and contacted support and it never got resolved and I never got the product and never got my money back. Amazon doesn't actually offer that much protection...
(Score: 2) by JoeMerchant on Monday October 23 2017, @02:20PM (2 children)
If they piss you off bad enough, you really should shut down your Amazon purchasing activity and take your business elsewhere.
As a family, we've been placing about 100 orders a year with Amazon for the past 10+ years, and used them ever since they started, so far we've been satisfied with any dispute situations we've encountered - most satisfied that the disputes have been very rare.
🌻🌻 [google.com]
(Score: 2) by urza9814 on Monday October 23 2017, @03:24PM (1 child)
Haven't closed my account yet, but I do always try to find what I'm looking for elsewhere now and only order from Amazon as a last resort. Usually get stuff faster that way too...Amazon shipping is the slowest I've ever encountered!
(Score: 2) by JoeMerchant on Monday October 23 2017, @05:11PM
Funny, my most common discomfort with Amazon shipping is that they promise it in 5-8 days and it arrives in 2 which has caused me anxiety more than once when I ordered a laptop for work and it was left sitting on my doorstep while I was out of town (luckily, our doorstep is pretty protected from the world.)
I do experience those super-long lead times when getting some stuff that's sourced directly from Asia, but for things like that if I'm in any kind of a hurry I usually use DigiKey or similar sources instead. My latest long-lead Amazon purchase was a bag of 30 vinyl coated spring clips, I think it was something trivial like $4 with free shipping and that did take nearly 2 months to arrive, but... it's not like my potato chips were getting stale waiting for the clips to arrive.
🌻🌻 [google.com]
(Score: 1) by Sulla on Thursday October 19 2017, @11:49PM
My town had a Sears and the neighboring town didn't, when both of our mom and pop stores went under we still maintained the lost jobs because they changed companies.
The town that gets Amazon will be slightly better off than the ones that don't.
Ceterum censeo Sinae esse delendam
(Score: 1, Informative) by Anonymous Coward on Friday October 20 2017, @12:02AM (2 children)
Listening to Pacifica Radio the other day (don't remember which program), it was mentioned that Alibaba is ahead of Amazon.
Google says that happened in late August.
...and Alibaba continues to widen the gap.
.
WRT the headline, there was this the other day:
-- OriginalOwner_ [soylentnews.org]
(Score: 0) by Anonymous Coward on Friday October 20 2017, @03:12AM (1 child)
So, after following the link and reading up ...
... some of their demands are pretty unrealistic. Amazon moves to a city and property prices don't rise? How the hell would that work?
As for the "fair share" tax thing, they're directing that letter at the wrong people. It's their city council that they should be screaming at about that one.
(Score: 0) by Anonymous Coward on Friday October 20 2017, @06:01AM
Well, if they don't ask, they have zero chance of getting what they want.
the "fair share" tax
It's a sure thing that Amazon's company vehicles and employees' vehicles will put extra demand on the roads.
Perhaps there will be additional demand put on public transit.
If the city has publicly-owned water/electricity systems, there will be added demand on those.
Public employees' time will be needed for building permits, etc.
There's gonna be an increased demand on inspectors' time.
Without public infrastructure/services, most businesses wouldn't exist|wouldn't make a profit.
Modern companies are often parasites in this regard, extracting wealth from the economy but not enhancing the community the way companies did in decades past.
It's their city council that they should be screaming at
I don't see your point.
-- OriginalOwner_ [soylentnews.org]
(Score: 2) by Snotnose on Thursday October 19 2017, @11:32PM (1 child)
Long answer? 99.99% of the time hell no.
This may get posted twice, it hung first time I posted it.
When the dust settled America realized it was saved by a porn star.
(Score: 2) by FatPhil on Friday October 20 2017, @02:53PM
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
(Score: 1) by khallow on Thursday October 19 2017, @11:58PM (5 children)
OTOH, if the city can get that tax income, it would justify some pretty high property tax waivers.
(Score: 2) by stretch611 on Friday October 20 2017, @10:28AM (3 children)
However, even if it does pull in 50,000 workers, how many are in that city paying taxes and how many will commute.
How many people will bag lunch vs how many will buy locally and pay sales taxes.
How many people will actually move to the area instead of just changing to a new job. Even if people do move to the area, the reason why they pay taxes (or at least what should be the idea) is the fact that the city/county/state supports them with services like fire/police/public transportation. The job location also has to have that support as well. Not to mention any road upgrades that the city needs to pay for in order to support the new location and mitigate the traffic.
The city may look like it will make some money... but the amount is only a small fraction of what it looks like on paper, if any money is made at all once you deduct the price that they whore out to Amazon or any other big company.
Now with 5 covid vaccine shots/boosters altering my DNA :P
(Score: 2) by JoeMerchant on Friday October 20 2017, @02:05PM (1 child)
Smart accountants will project all that, if they're smart enough they'll get somewhere close to reality, and these are the numbers the deal is decided on - by both sides.
Meanwhile, what hits the negotiation table are skewed projections either hyping the deal for how great it could be, or all doom and gloom like you are pointing out - and they argue back and forth, and they leak stuff to the press to try to sway public opinion, and in the end it's about the corporation vs the politicians - once the politicians think it is in their own best interests to take the deal, it is done.
I hope you chose your politicians well.
🌻🌻 [google.com]
(Score: 2) by stretch611 on Friday October 20 2017, @02:18PM
Look at the US Congress... need I say more?
Now with 5 covid vaccine shots/boosters altering my DNA :P
(Score: 1) by khallow on Friday October 20 2017, @02:34PM
Let us note that 5% is a small fraction.
(Score: 2) by JoeMerchant on Friday October 20 2017, @01:55PM
It's a negotiated open/free-market deal ergo: In an ideal market net benefits to the host city should be near zero. The competing cities should be somewhat cautious about risk points in the deal, and that caution amounts to the net benefit to the city in the future. If a city takes too much risk, the deal could end up being a net expense to the city.
The sure thing about HQ2 is that it will represent commercial growth: air traffic, truck traffic, at least some jobs, tax income if it's not all negotiated away but also expenses for increased road capacity, police, fire, utilities, etc.
It would be nice if they would hire 10,000 AI developers each earning $200K per year, but that's not guaranteed. It's nice to talk about win-win scenarios, but in the end the city has to weigh its own interests against anticipated benefits of hosting, and offer incentives commensurate with those benefits.
🌻🌻 [google.com]
(Score: 2) by leftover on Friday October 20 2017, @03:50AM (1 child)
While some of the recent "deals" have been spectacularly outrageous, I think it pays to take a look back.
OK, did that. Have ANY such arrangements EVER wound up being anything but private pilfering of public coffers? Certainly none that I know of. Yet the jobs claims keep going up like fireworks. In my small city, a currently on-going rework of an _existing_ interchange was crammed down our throats with the utterly unbelievable "promise" of 56,000 new jobs.
Too stupid for words.
Bent, folded, spindled, and mutilated.
(Score: 2) by JoeMerchant on Friday October 20 2017, @02:01PM
Jobs and growth - that's the argument. The city gets bigger, the megacorp gets a sweet deal, and the politicians get the benefits of brokering a big deal.
If you like growth, you can say it's good for the city. In terms of "fair" - nothing in life is fair, these sweet deals for megacorps are no exception. You could argue that "incentive zones" and similar smaller sweet deals are offered to mom and pop shops, and sometimes those are proportionally sweet for the little businesses, but all in all, if you're not on the receiving end of these deals they do just look like pork, and anytime something like this gets brokered there's usually more than one politician who wrangles some personal gain out of allowing it to happen.
🌻🌻 [google.com]
(Score: 4, Insightful) by bootsy on Friday October 20 2017, @08:12AM
It is certainly true in the US and the UK that the majority of people are actually not employed by very large companies but by small firms of 20 people or less. The UK's largest employer is the State run NHS and back in the day the ex state owned British Telecom (BT).
All this pandering to large employers is actually a very bad use of tax money ( our money ) and is very anti-competitive. We should actually be doing things to encourage small companies to start and then help them grow e.g. cheap small offices rented of the local council/municipality, shared usage of infrequently used facilities such as printers and machining equipment (maker spaces) and free business advice and networks to raise funding.
These smaller companies are less likely to leave the local area/county/state let alone move country. The EU actually paid to help Ford move factories out of England and Wales and relocate to Eastern Europe.
(Score: 2) by nobu_the_bard on Friday October 20 2017, @12:42PM (1 child)
It's easy to say the average pay will be $100k if you just have one outrageously high paid job "officially" located there and 49,999 poorly compensated jobs...
(Score: 2) by FatPhil on Friday October 20 2017, @02:57PM
Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves