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Prom Queen Breaks Hearts

Mark O’Connell – 14 Nov, 2018 – US Perspective

Lots of people showed up for the dance wearing their best suits and shiny shoes hoping to catch her eye, but the outcome was always inevitable – prom queens go home with quarterbacks.

You can lament the cynicism behind the competition to pit various States and communities against each other in an incentives bidding war to attract the Amazon HQ2 project, and the wasted hours and energy pulling together the responses to RfPs by hundreds of EDOs, or indeed the false expectations that this approach was going to be different, but we should not be too surprised at the outcome.

Many EDOs have told me that the experience of preparing a complex and comprehensive response for Amazon has been formative and even where they knew the probability of success was remote, the stock of collateral and stakeholder relationships they now have at their disposal will be hugely valuable for other prospects. On the other hand some are bitter that it was never a real competition and political pressure forced them to abandon the day job and focus solely on this for many weeks at the expense of other more accessible opportunities.

History would suggest that the location drivers and criteria for a secondary HQ are remarkably consistent: global city to burnish the image of the company, access to an existing pool of talent and a draw for mobile talent, presence of world class investment banking, legal and professional services,  international and domestic airline linkages, resilient digital infrastructure, iconic real estate or the option to build, and access to the administration and policy makers. Corporate tax was a key driver in the past, but the US is getting more competitive and effective global tax rates for the FAANGS (Facebook, Amazon, Apple, Netflix, Google, Stock), is next to zero. New York and DC tick most of these boxes, and the trade-off will be whether commercial drivers, access to markets and talent in the case of NY trump access to lobbyists and policy makers in the case of DC.