I think NYC (or SF or any high cost of living area) is a crazy place to put HQ2. In terms of subsidies, while it's easy to dunk on Amazon, and no business should be getting subsidies IMO, there is a real issue here:
Cost of Living in NY is higher and Amazon will have to pay higher wages if it puts jobs there rather than a place like Nashville. That's higher wages for the same job. Pretty much every company has a cost of living multiplier and pays different wages for the same position based on where you live. So given that Amazon has a choice to locate in the low wage or high wage area, it seems reasonable for the high wage area to offer to offset some of those extra costs. Otherwise why would AMZN even consider a high cost of living area like NYC?
Now to me it's clear that the market signal is that they should open the new office in a lower cost of living area, which is what's going to happen now. A small victory for reason. This means more Amazon workers will be able to afford to buy a house and Amazon will be able to pay them less. Good news.
There's a reason you get superstar hubs, instead of companies and employees equalizing to somewhere else as soon as one metro gets a bit more expensive. Network/ecosystem effects are a real thing.
Google already has some dev offices in cheaper areas, like Pittsburgh, where office space is cheaper and the salaries they pay slightly lower. And yet, they still choose to double their headcount in NYC.
Just saying, "well I guess Google is just being irrational for no reason" would be simplistic, childish thinking. Google doesn't choose sites or increase headcount on a whim. They're going to do it because there are real advantages to the major tech hubs.
Educated guess, as someone who works at Google now and used to work at Amazon: it's easier to attract people to major tech hubs, because they offer more career stability in the form of having lots of other tech companies around. Being in Kansas City making a Google salary might sound great, until you realize that if you lost that job for some reason, there's nothing around in the same tier.
Also, the kind of person who wants to live in a cheaper city, with a big house for their family, is also the kind of person who's going to be reluctant to move from wherever they currently live anyway. That demographic is going to be hard to convince.
There is another aspect of this which some younger people miss. A hub city means a dual professional couple can both find long term career paths in the same place. That’s much harder to do in a non-hub city. Top talent tends to marry top talent as per assortive mating.
> Google already has some dev offices in cheaper areas, like Pittsburgh, where office space is cheaper and the salaries they pay slightly lower. And yet, they still choose to double their headcount in NYC.
Location, Location, Location.
Yes it's cheaper to live and run a business in Kansas but then you're in Kansas.
I don't want to tell you what the right trade offs are between, say, living in Phoenix or Dallas or Charleston and living in NY or SF.
But at some point people want to start families and buy a house and that starts to take precedence over being in a cool area. The only issue is jobs -- can they work remote, can they find a local employer, can they work for themselves?
So there is a huge demand for higher paying jobs in lower cost areas compared to the demand for higher paying jobs in higher cost areas. You personally may think it unbearable to live in Scottsdale, AZ or Minneapolis, MN, but most people find it pleasant enough and will pull the trigger as soon as they can find a job that pays even 2/3 of what they are earning in SF or NY.
Others want to just stay in an exciting, vibrant area. You're projecting your values here.
> will pull the trigger as soon as they can find a job that pays even 2/3 of what they are earning in SF or NY.
The very fact that such jobs are somewhat uncommon, even though programming ought to be the kind of thing that's easy to distribute/make remote, should tell you something.
>So there is a huge demand for higher paying jobs in lower cost areas compared to the demand for higher paying jobs in higher cost areas
NYC is the most populated and density populated city in the country, which is just another way of saying its the city with the highest demand. If most people rather work and live in Scottsdale than that would be the most populated and density populated city in the country.
Why is that hard to believe? More people may say they want to Malibu than Detroit but until they do it doesn't matter. I would love to have a Tesla but dreams don't count as demand.
Right. So, you see what I'm saying is that "demand" refers to a curve. And at any given price, there is a quantity on this curve.
So, take city A - where house prices cost, $100 and it has 100,000 people. In City B, house prices cost $500 and it only has 10,000 people.
You still don't see the full demand curve for either city. The statement "City A is in more demand than City B" is not a meaningful statement. That's what I was trying to say. I was trying to point out the absurdity of just counting people as a way of inferring the shape of a curve.
Now, how could your statement be changed to make it well defined? You could say "At every price point, City A will have more people than City B". Which means the curve of demand for A is above the curve of demand for B. But is that really true for NY? I doubt it. Maybe, but you'd need to provide some other evidence. And such evidence is hard to find, because NYC is a donor city -- more people move out every year than move in.
The only reason why NYC's total population is growing is because births outpace deaths and it is a port city for new immigrants. But for US-US transfers, it's shrinking by about 2% each year. So at least in the universe of US cities, people tend to choose to live elsewhere.
But that doesn't mean that NYC is a bad city. It most likely means that it's a little out of equilibrium -- most likely because of the influx of immigrants. E.g. you can imagine that existing New Yorkers have some equilibrium price, and then an increase of immigrants raises that a bit, so that some of the non-immigrants leave. This is true in general of port cities: you see an influx from outside the city that pushes a certain number of the people inside out.
Now are these immigrants coming to NY because they prefer it to Phoenix or whatever? No, they are coming to NY because it's a port of entry and because they have relatives there. Immigrants tend to cluster and stay put, which is a shame, because most would be better off living elsewhere, just because they tend to cluster in ghettoes in high cost areas. That's a whole other interesting effect -- why immigrants tend to stop at the first place they land and stay there.
How else could your statement be changed to make it well defined? Well, you can say that real estate prices are really high in New York, meaning that overall it is in great demand compared to other cities where real estate prices are cheaper. This is, I think, your strongest argument. Except there are a lot of factors that affect real estate prices -- including zoning restrictions, prop 13, and most importantly # of high paying jobs, etc. For NY, that would be Wall St jobs or FIRE more generally. Now you could argue that NY has so many Wall St jobs because it's great, but we both know better. There are historical reasons for these types of agglomeration effects that are kinda arbitrary and in the case of NY go way, way back. Even in the period of white flight when NY was dangerous as hell and half empty you had all those Wall St jobs concentrated there.
So, bottom line, it's really hard to infer preferences from the data you are citing and even from the better arguments you could have made but chose not to.
Honestly, I think you are not capturing the trade offs here correctly. There is some value to being in a hub, but not infinite value. For example a start up gains a lot more benefit from being in Silicon Valley than a company with 10,000 developers. The startup needs access to VCs, and it needs to hire superstar programmers.
Once a company reaches critical mass, it doesn't need access to VCs, and isn't able to hire superstar programmers at scale, so the quality of the average employee declines compared to what you see in startups. Now you start talking more about repeatable, workman-like code rather than brilliant groundbreaking code. You can still do the latter in a research center that you can keep in the hub and move a lot of the other code to the periphery, which will be most of your employees. After all, we are talking about HQ2 here.
At the same time, you have housing markets that are so insane that the majority of your developers will not be able to buy a house, which means they are going to leave you or demand really high wages -- wages that a company with 20K devs can't afford.
This is the inexorable logic of the market. Suppose we are not talking about people but some other scarce resource. Very expensive leather. You put that into the exotic cars but when you need to produce in high volume, you look for cheaper substitutes in order to help scale your operations. Everyone likes to think they are rockstar developers, but your typical AMZN HQ2 employee is not a rockstar, they are probably just a decent programmer (Not that there's anything wrong with that :P ). It just doesn't make sense to put HQ2 into a place where you have to pay 200K to win over the marginal employee.
> For example a start up gains a lot more benefit from being in Silicon Valley than a company with 10,000 developers.
No, I'd say they have about equal value. Consider, Google has tens of thousands of tech workers in the bay area. How many other metros could they feasibly relocate their HQ to? Even if you assume that only, say, a third of their employees decline to relocate with them, you're possibly looking at ~10,000 job openings you'd need to staff up on within a year or two to not be absolutely crippling.
> You can still do the latter in a research center that you can keep in the hub and move a lot of the other code to the periphery, which will be most of your employees.
This completely glosses over how companies work. Google doesn't have two tiers of software engineer types, where one gets more exciting stuff and better pay/benefits, while the other languishes on boring things with mediocre pay. Trying to split up the company that way, "we'll just hire crappier engineers in [cheap place] now and treat them worse because they're dumber" would be a total disaster.
> you have housing markets that are so insane that the majority of your developers will not be able to buy a house, which means they are going to leave you or demand really high wages -- wages that a company with 20K devs can't afford.
While this is absolutely a problem, and I applaud efforts to increase affordability either in the areas where tech HQ's already are, or by distributing more offices elsewhere, you're missing the obvious fact that these major tech companies already do this, and it already works. Yes, some people leave. The strongest, and probably most valuable employees largely don't, because they make enough to offset the increased cost of housing: a T6 at Google may make 400-500k/year.
Cost of Living in NY is higher and Amazon will have to pay higher wages if it puts jobs there rather than a place like Nashville. That's higher wages for the same job. Pretty much every company has a cost of living multiplier and pays different wages for the same position based on where you live. So given that Amazon has a choice to locate in the low wage or high wage area, it seems reasonable for the high wage area to offer to offset some of those extra costs. Otherwise why would AMZN even consider a high cost of living area like NYC?
Now to me it's clear that the market signal is that they should open the new office in a lower cost of living area, which is what's going to happen now. A small victory for reason. This means more Amazon workers will be able to afford to buy a house and Amazon will be able to pay them less. Good news.