The Medium Rules: The Amazon HQ2 Pullout: Anatomy of a Disaster, with Ari Wallach and Duff McDonald
Last November, after an extended RFP bidding process involving initially 280 cities, narrowed down to twenty “finalists”, Amazon announced Long Island City in Queens, New York as its “HQ2” winner. New York’s agreements with Amazon guaranteed $27 billion in revenue for New York with $3 billion returned to Amazon in tax credits. In February of this year, however, on Valentine’s Day no less (slightly tone deaf!), Amazon abruptly canceled its plans entirely and reversed course, citing mounting criticism it received from state and local politicians, activists and community groups in and around Long Island City. The main arguments from the so-called resistance were that it would cause housing costs to skyrocket, drive out low-income residents and worsen congestion on the subway and streets. Others have distilled the story into three categories: (1) subsidies/corporate giveaways, (2) secrecy and backroom dealings and (3) corporate social responsibility and corporate behavior.
On this episode of The Medium Rules, host Alan Baldachin is joined by Ari Wallach and Duff McDonald with a view to dissecting the various causes and effects, both short and long-term, implicated and exposed by the Amazon HQ2 debacle. Is this a story of corporate greed and Albany arrogance finally getting their respective comeuppance? Or, was the turning back of Amazon HQ2 an ahistorical blunder of epic proportions? How much should we care about community preservation, or is this just a nostalgic fever dream of a very vocal, activist minority? To what extent are we required to extrapolate the Amazon HQ2 into broader American political and social currents tracing back to Occupy Wall Street and the rise of the new left, or is the story much more localized in nature? Ari Wallach is the founder and CEO of Longpath Labs. We had the pleasure to connect with Ari for our very first episode of The Medium Rules last June. Longpath Labs is a 501(c)(3) organization whose mission is to promote and advocate long-term modes of thinking, synthesizing and responding to humanity’s greatest long-term challenges. Duff McDonald is a first timer on The Medium Rules. Duff is a New York-based journalist and is the author, most recently, of The New York Times bestsellers The Golden Passport and The Firm. A long-time magazine writer, Duff has written for The New Yorker, Vanity Fair, New York Magazine, Esquire, Fortune, Business Week, Wired, Time, and other publications. Duff wrote the book review for the New York Times on Brad Stone’s essential book on Amazon, The Everything Store. Duff is currently working on a book with Christiane Lemiuex about what makes entrepreneurs tick – Christiane is the founder and CEO of The Inside and a previous guest on The Medium Rules.
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Alan BALDACHIN: Joining me today in the HBA podcast studio are Ari Wallach and Duff McDonald. We had the pleasure of connecting with Ari previously on our very first episode of The Medium Rules last June. For those of you who didn’t get to listen to that podcast, Ari is the CEO of Longpath Labs, whose mission is to promote an advocate long term modes of thinking, synthesizing, and responding to humanity’s greatest long term challenges.
Also joining today is Duff McDonald, a first timer on The Medium Rules. Duff is a New York based journalist and is the author most recently of the New York Times bestsellers, The Golden Passport and the Firm.A long time magazine writer, Duff has written for The New Yorker, Vanity Fair, New York Magazine, Esquire, Fortune Business Week, Wired, Time and other publications. Duff wrote the book review for The New York Times on Brad Stone’s essential book on Amazon, The Everything Storewhich is what we’re going to talk about today as we’ll get to. Duff is currently working on a book with Christian Lenoir about what makes entrepreneurs tick. And Christian is the founder and CEO of The Inside, and herself a previous guest on the medium rules.
So today, Ari and Duff are joining to discuss the Amazon HQ2 pull out. Like many New Yorkers, we all have both very strong, and I think very mixed feelings about what feels like it will prove to be a seminal event, not only in the way decisions are made about land use and economic development and corporate subsidies in New York City, but possibly all over the country. So guys, thank you very much for coming in. I think this will be sort of a freewheeling discussion that’ll take different paths and I think different topics we’re going to hit.
Ari WALLACH: Let’s take the long path.
BALDACHIN: Let’s take the long…
Ari WALLACH: Unfortunately, I have eight different bulleted talking points I need to get through so we will not be freewheeling.
BALDACHIN: Please cut them down to four. So let me set the table here. Last November 2018, after an extended bidding process involving initially 280 cities responding to RFPs, then narrow down to 20 cities, Amazon announced with much fanfare that Long Island City in Queens New York, was selected as its second global headquarters, HQ2. The New York State’s agreement with Amazon guaranteed $27 billion dollars in revenue for New York, 25,000 new jobs going up to 40,000 jobs ultimately, and it promised $3 billion are returned to Amazon in various forms of tax credits, principally state tax credit. In February of this year on Valentine’s Day, no less, picking that day slightly tone deaf on Amazon’s part, I think we’ll see a theme there. Amazon abruptly canceled its plans entirely, citing mounting criticism it received from local politicians and activists and basically pulled out.
The main criticisms from the so called resistance to the deal where that the Amazon HQ2 would cause housing costs to skyrocket in Long Island City in that part of Queens, drive out low income residents, and worsen congestion on the subway in the streets. I think there were also feelings as we’ll talk about that the new jobs would not go to locals, but would be imports and would not be evenly distributed across service workers and the local community.
People have distilled the story into three categories: subsidies, corporate giveaways, secrecy and backroom dealings, and issues of corporate social responsibility and corporate behavior. And I think we’ll get into all three. But let’s talk about Amazon for a moment. Amazon is a company that is consistently and outspokenly focused on the long term in that sense…And Ari, this is a theme of yours, it would seem that Amazon would be a perfect long path corporation. On the flip side, Amazon has a reputation as being predatory. Everyone may not subscribe to this view, but it’s out there; somewhat assert that Amazon deliberately uses its massive market power and data sets to favor its products and services and crush competition in an unfair way.
It is also known for fairly severe working conditions and being fairly hostile to unions, although that doesn’t necessarily distinguish Amazon but that’s the case. Let me just start by asking you guys how do you think about Amazon when we think of HQ2? Let’s take a top line here and let’s start with you. But let’s go with some just initial impressions.
WALLACH: I think Amazon in many ways is a manifestation of Jeff Bezos overarching philosophy that you need to think about the customer and what the customer wants. So before we go into kind of the multiple critiques I know of Amazon, one of the things—and you know this from the review the book is, in most of his meetings, there’s always an empty chair, right? This theoretical empty chair, which even though there’ll be a bunch of executives there, the empty chair represents what the customer wants. And so I’ve been thinking about what happened with HQ2 and thinking about that empty chair and thinking about how do we delight and meet the needs of the customer, which has, I think, led Amazon to be in many ways as big as they are? Because this is what they’re constantly thinking. I mean, like, as I was walking out my door, I tripped as I often do over an Amazon Prime box, as do, I think, as a very large number of Americans who may be critical of Amazon but also have the box, the proverbial prime box that they trip over every morning.
And so in thinking about that chair where I think they could have done a better job with HQ2 is thinking about who is in that chair and who the customers are and who the stakeholders are. So it’s one thing to think about what I want—I want the next day delivery, and they’re really good at that. But I think as they move forward in this economy, in this country, around the world, that that share that’s always held open for the customer needs to be expanded, both to all the stakeholders in the communities in which they operate and how they think about that, and to future customers, and what I mean by that, it’s like trans generationally. So Bezos is doing great thinking around what he’s doing with Blue Origin and think about the next couple of hundred years. I think it behooves Amazon to be thinking about who’s in that chair, and who will be in that chair for the next several decades in everything that they do, be it their climate impact work, which as you saw a bunch of employees over just in the past week, basically signed…
WALLACH: Revolting in saying we have to do something around…
BALDACHIN: Do more.
WALLACH: Do more. Again, I think this keeps speaking back to that empty chair and who is in that chair. So is it just me ordering something from my kitchen table? That’s great. And that gives you an amazing market cap and makes you one of the wealthiest person on the planet. But at the same time, we have to think about that chair being a transgenerational chair, and the next several generations, both who will sit in that chair and who will be impacted by the work they do. And so that’s my invitation, my offering for Amazon is to be thinking in a broader, longer, more temporal context around the work that they do. That’s my top line on Amazon.
BALDACHIN: Okay, Duff, give me your top line. How are you distilling this?
MCDONAlD: I think Ari makes a great point because Jeff Bezos is maniacal focus on the customer has us all in a devil’s bargain with this company. Remember, delete Uber, same thing, a lot of people stopped using Uber for a while. I bet you every single one of those people has used Uber since the day they said they weren’t going to…The sort of state of our culture is we have a level of apathy, where we are willing to tolerate Amazon’s notorious and flagrant disregard for workers, disregard for state taxes for convenience. You could extend the argument to Facebook too. They’re selling our data as they say they’re protecting it, and how many people have actually been able to break up with that particular app? So I think what Bezos has done…
BALDACHIN: Not only protecting—I’m sorry to interrupt—but getting breach, getting it breached.
MCDONAlD: Oh, yeah, entirely.
BALDACHIN: Not safeguarding it, abusing it and not safeguarding it.
MCDONAlD: That company is an exercise in hypocrisy, right? Sheryl Sandberg actually said , “We need to do a better job of protecting your data.” That was one of her lines in the middle of last, you know, when the stuff started climaxing last year. It’s like, you have never been protecting the data of your customers, you need to do a better job of it. You’re selling it as fast as you can.
So Amazon, I think presents us just with the extreme example of that, right? We’ve got a company that is not a good corporate citizen to in with regard to most stakeholders, say for customers, and we somehow tolerate it. So when we come back to the New York thing, what’s my top line? It’s like, other than the sheer size of the project and what the potential for that was. I don’t you know, it doesn’t really move me that Amazon may not come to New York City. Like if you’re going to make a list of corporate citizens that we would welcome you know, might still be short, but Amazon wouldn’t be near the top of it, except for the mere fact of the size, that’s it.
BALDACHIN: All right, let me ask you this, so the resistance, so to speak, what do you make of it? What do you make of the merits of the resistance? And I think that, again, there were issues with respect to secrecy and lack of transparency in Albany. The New York City Council was cut out of the decision making process. And as we know, the New York State Senate tried to remedy that by nominating Janice to one of the boards that would have a veto over the project, which it turns out Cuomo could have overridden but that was the death blow, so you had secrecy and transparency issues. You had a big community uprising coming out of Queens based on issues of displacement, based on issues of diversity. Do you view the resistance and the criticisms there as legitimate? Do you think that they were justified in how influential they ultimately were in getting Amazon to pull out? Or do you feel that as a lost opportunity and a mistake?
WALLACH: I’m going to not answer that in the binary way that it was set up.
BALDACHIN: Fair enough.
WALLACH: I think it was a missed opportunity, but it was a missed opportunity…. Let’s go back. The way things have traditionally been done, no longer works. And it’s interesting that Amazon, you know, what you normally do, you hire some top flight public affairs firms which are usually staffed by former chief of staff’s in senate office or congressional offices. And they’ll do things in closed meeting rooms with other people and kind of negotiate in the public….This has gone on not just for decades but for centuries. And it’s interesting that Amazon being at the forefront of this kind of digital evolution of commerce kind of got not just blindsided. But the don’t know don’t know there was that transparency— what the digital revolution has brought in terms of transparency, and people’s mindsets about inclusion in a process they didn’t lean into, right?
So they’re doing it the old school way but folks now who are used to…Interestingly enough, when I go to shop for something, it used to be I would go into a store, there was a price and I’d be like, “Wow, like, you know, $99 for that, that sounds about right.” Now what people do is they open up the Amazon app and they check and they look for transparency and they have access to all this information. So in many ways, this kind of revolution in commerce that Amazon has brought in terms of price transparency, they didn’t leverage that same mindset of understanding how you actually do things in a political politically as savvy way as possible. And so in some ways out they got outflanked by the very mindset and desires that they built into customers into all of us in the first place. We’re now used to seeing everything. We want total transparency. They’re one of the ones who push that into the realm even though that was even a possibility. And then when they use the kind of old school process of you come in, you see one price on the shelf, take it or leave it. It’s just interesting that they got caught with…
BALDACHIN: Hoisted on their own…
WALLACH: Exactly. I mean, it is Amazon that has created this entire mindset of transparency and then they didn’t leverage what they actually did, and then push forward. So that’s the first thing that comes to mind in thinking about this is well, you’ve got caught by your own net and your own mindset that you’ve put out into the world.
And so that’s first and foremost, and then on your second, was it a missed opportunity? Here’s the issue like, you need jobs in general to keep an economy going. And as the percentage of people around the world, specifically in America move to urban centers, you’re going to have to try and figure out jobs that makes sense for as many people as possible. And what this was doing, and what I think the missed opportunity was, was not just for the construction jobs, which were going to go out through 2033, and not just for the hundred thousand dollar plus jobs that were going to happen with people who are moving in, who are going to be doing advertising, data analytics and whatnot. It was going to be what they were going to be doing for the general overarching, educational ecosystem in the city.
So when you looked in some of the plans of what they were talking about doing in terms of internships and training, and going out into the high schools, and I think the missed opportunity was elevating our overall state of play and thinking among not just the workforce of 2019 through 2030, but all the way through 2040 and 2045. Now we can disagree and say or both can disagree that those aren’t the right jobs, those are not the jobs that we want. But things are moving in a direction where we are not going to open a heavy industrial plant on the waterfront.
And so if we want to ensure that the jobs are there for my children who are all under the age of 10— I have two 10 year olds and 6 year old—what are we doing to ensure they have the right skills, having the employers, even if you don’t want them to work for Amazon, having ensuring that they are there helping guide the educational frameworks, not own them, because not everyone should be thinking about, “Oh, I need to be educated so I can work at Amazon at one point.” But thinking in a digital native first way that was a missed opportunity.
BALDACHIN: Duff, so I’ve got to read this quote that I sort of—getting ready for this podcast last night just jumped out at me, and this was in the Washington Post, ironically owned by Bezos in February 16 this year, two days after the poll.
“The collapse of Amazon’s project in Queens led to an intense round of fingerpointing among the company, politicians who supported the project and those who opposed it. Opinion poll showed strong popular backing for the project in principle, but there was less support for the subsidies.”
I think we’ll come back to the substance because I think there’s an interesting discussion there. “Also, opponents were organized and vocal.” “This is a disaster on all fronts,” said Richard Florida, a professor of the University of Toronto School of Cities. He said, “Amazon erred by picking a site in the part of the city filled with liberal sympathizers in unions and community groups. Bezos should stand up and fire the site selection team,” Florida said, referring to Amazon’s founder and chief executive who also owns the Washington Post. “Anyone who was sent here would have said, ‘You are putting this in a hotbed of activism. Somebody didn’t do their homework.”” What do you make of that?
MCDONAlD: So the other part about basis should fire somebody; this one goes all the way to the top.
BALDACHIN: How does that happen?
MCDONAlD: They didn’t they didn’t inform him of their decision after the fact so I think this one…If you want to look at Amazon and say, who blew this? It’s Bezos site, right? This is the biggest announcement they’ve made/unmade in years. So I think blame for this one can go right to the top. But Richard Florida’s right, like this is…I think the people of New York are…A lot of the debate afterwards and we saw some of this at a panel the other night, sort of focused on Amazon bringing it tech ecosystem, enhancing our tech ecosystem. I think that’s off the mark. Amazon may use tech but it’s a retailer I think the jobs at Amazon aren’t the kind we think of that, you know, spin off little baby Googles and stuff from the people who work there. You’re not going to get, you know, we have enough…
BALDACHIN: Shopping startups.
MCDONAlD:cloud business. But when was the last time you heard about a breakout company founded by an Amazon vet. I couldn’t even… I was trying to think of one in preparation for this. I know they exist. I couldn’t think of one. But back to your point about the neighborhood, absolutely. Why? I read something this morning that there were, like, two dozen parts of the city were competing for the right to host this. And how they ended up where they did is beyond me. I think Bezos wasn’t paying attention.
BALDACHIN: You know, it’s one of those things where on the one hand, hindsight is 2020. On the other hand, it really was plain as day. And to me, it sort of implicates corporate decision making the you know, smartest guys in the room kind of dynamic. In this political moment, what Richard Florida is saying rings true and maybe it’s hindsight. But you can imagine these guys sitting with, you know, just a map in their office in Seattle, on the water, great transit, you know, outside Manhattan. So there are all these tax credits available, which is the case. A lot of the tax credits they were taking advantage of wouldn’t have been the case had they been on in Manhattan south of 96.
MCDONAlD: So in a vacuum, you could write a case study where the location made sense, right?
BALDACHIN: That’s kind of where I’m going.
MCDONAlD: Right. So I wrote a piece for the times when I was working on the golden passport about who hires the most MBAs, and Amazon at the time I wrote it, this is several years ago, four or five years ago, was the number one hire of MBAs in the country.
BALDACHIN: That’s incredible.
BALDACHIN: That it’s not Goldman Sachs or Google or…
MCDONAlD: Yeah. So it’s not surprising that a case study that made sense within the four walls of HQ in Seattle, you know, came out and was dead on arrival.
WALLACH: I also think – I want to put out an alternative future or actually an alternative past and an alternative future connected to it. I think that the massively missed opportunity would have been for them actually to place it there. But instead of having this announcement where they just kind of drop it and say we’re doing this. Can you imagine this alternative parallel universe? Amazon, having conversations with community groups like make the road who is one of the main kind of resistance groups pushing back because look, BJ was into this, they wanted its job…
BALDACHIN: Which is a local union.
WALLACH: A local union. And in Queens because they I already had kind of a deal in place to service any jobs on that site, it doesn’t matter who went in there. So they were for it because right now there’s nothing there so it would have been jobs. You can imagine….
BALDACHIN: And they also had a work within the system, kind of mentality to…
WALLACH: Yeah, they had a work within the system. But in my alternative history and future, Amazon would have picked this location. But instead of just kind of announcing it, it would have had a number of not just town halls where like we answer your questions, but literally kind of appreciative collaborative inquiry sessions with all these community groups, because at the end of the day, like most of the stuff that’s for sale on Amazon, most like you want, you need, like people want jobs, there’s commerce, like in this…Whether you’re social, a democratic socialist, or some even former socialist, there’s still going to be some form of commerce, right?
And so that the missed opportunity in my alternative universe, Amazon would have had these conversations, this kind of middleware with these groups about like what is important, what is not important? What do you want? What do you not want? You know, one of the examples is one of the main push backs was when HQ2 would have gone in, all of the rents would have gone through the roof in the local area. This was the pushback because it usually happens.
BALDACHIN: As a matter of fact, there were canaries in the coal mine there where there were sales going on, post announcement pre pull out where prices were skyrocketing.
BALDACHIN: So the conversation that it would have been had would have been bringing this to the attention of Amazon, working with the City Council, putting in kind of price control so you didn’t have immediate flipping. I mean, there are solutions to so many of the things that there was pushback on this. It could have been an amazing going back to this case study, a case study of actually how you do this, right?
And so that’s what we need. So the binary is like, “Well, we don’t want this. We do want this. It was great. We pushed Amazon out.” It’s also a missed opportunity to think about like, how do we do this? Like how do we think about— not just economic growth, that’s a whole other podcast about growth on a finite planet, we can grow infinitely. But how do we grow and evolve commerce and economics within a city, within the urban footprint in a way that is equitable, inclusive, and just for all? This would have been an amazing case study on how you do that. And I don’t just mean so it could have been rent controls…
o if you look at the list of things that there was pushback from the resistance, I think, look, there’s an element of the resistance that just doesn’t like Amazon and it’s not about Amazon in Long Island City. It’s about Amazon as an actor. And they would be happy with no Amazon full stop, and just mom and pop stores, like just eradication of it as an entity. So if you believe in that, there’s probably no room for what I’m laying out. But if you take that off the table and say there’s still going to be an Amazon, there should still be an Amazon because we should have that that freedom to create in that way.
All the list of their…I think could have all been spoken for and taken care of, everything from minimum wage, to rent controls,to training and everything. And the missed opportunity was to engage in that type of conversation a priority of the announcement. We just don’t have, to be honest, we don’t have like organizations or firms that do that. We have this conflictual model of development, like the business wants this, the local groups or NGOs want this, and they battle it out. And there’s no kind of collaborative Switzerland entity or way of even having this. And that, to me is the takeaway…
BALDACHIN: The UN almost [crosstalk] people can talk.
WALLACH: Well, having the UN as a client, I could say that…
BALDACHIN: I know that’s a swear word in some ways.
WALLACH: It’s fine with me. The thing that I came out of most of this is like, wow, we are missing that entity and that set of skills to have these conversations in general. So in many ways, this was emblematic of the general polarization we see in society. We don’t have these kinds of discourse models or platforms or even ways of thinking about how we bring folks together ahead of time, it just becomes a conflict-based model, which was just unfortunate.
BALDACHIN: Duff, do you think there’s a parallel universe where this could have been pulled off? Or do you tend to sort of agree with Florida’s sort of analysis that this was doomed from the start?
MCDONAlD: Yeah, I think yes and no is my answer. I think, absolutely if it had been played differently, we could have seen a different result. That said, you know, there are two kinds of companies now, right? You can see Mark Zuckerberg these days; we’ve got the lasso around him. He’s now obliged to answer our complaints, or seems to feel he is. And then there are other companies where, you know, when was the last time you actually heard Larry or Sergey weigh in on something personally?
BALDACHIN: In fact, they seem to be going the opposite direction.
MCDONAlD: Right. And Bezos has made a career here. You know, it’s no surprise he’s from the hedge fund world, right? Where he doesn’t….He’s not having this conversation with us. And it’s worked for him so far because if you look at all the workers’ right stuff, all their warehouse workers, some of the stats from Brad Stones book were just egregious, right? An extra 10 minutes of rest time when the temperature topped 200 degrees. The state tax issue, we never saw him respond to it.
So I think as sort of a corporate MO, something as big as HQ2 was a Bezo’s level thing, right? But he’s not having a conversation with the rest of us. So it would have been nice had we’ve been able to be there but I don’t think Amazon is the company that was going to get us there because when is the last time you saw him…
BALDACHIN: Because of who they are.
MCDONAlD: Yeah, right.
BALDACHIN: I mean, that is an interesting question about it, is this Amazon specific? Is it Long Island City specific or are there broader lessons about corporate subsidies? And in that sense, I want to Game of Thrones like move up the state, if we could have cue the Game of Thrones music and animation, up to Albany because my baton there is Cuomo and of course, between Cuomo and de Blasio, the fingerpointing was just as you would expect, out of control. But Cuomo, baked this deal in private, cut out the city council, tried to crush the resistance and almost wrote it’s epitaph out of the gate. But the playbook he ran has worked for him and has worked for Albany and has worked for the rich and powerful in and around New York city and state for years: Hudson Yards, Yankee Stadium, Atlantic Yards. Finally they hit a wall on this one. And I would say people got sick of it. And it was a perfect storm of pushing back on that kind of politics. And this involved all the elements that usually see New York State: real estate, backroom dealing. I mean, you may as well thrown Shelley Silver and Dean Skelos in there, both in jail at the moment, I believe, if they’re still rotting in there. So, you know, I guess when I look at this, I put a lot of blame on the structural elements about how decisions are made. Sort of tectonically, maybe that’s starting to change for the better.
WALLACH: Yeah, look the going back to what I said earlier, these old models aren’t going to work anymore: backroom deals, top down, lack of transparency, lack of input. You can’t expect a people, specifically younger generations to grow up as kind of DIY, growing up on Wikipedia, where everyone can go in there and edit, where everyone kind of has an access. There aren’t like so many locked doors. That’s a mindset, that’s a way you grew up. I see it in the folks that I work with, in the students that I teach at Columbia. There’s this old Albany way, it still works a little bit but not for long. And so the overall governance systems that again, are emblematic of an old way of doing it. And that old way is exactly what Amazon went up against and pushed through is now going to pervade politics. And so I think this is not a one off, this is a beginning of folks realizing both up in Albany, but in Long Island City, be it first generation immigrants are the heads of NGOs, that the old ways of doing things aren’t going to work. And I think it was a combination of a lot of forces. But this was not so much a shot across the bow but this was the big sink, this was the torpedo that says, you can’t do this anymore.
BALDACHIN: Yeah. I mean, Duff,let me ask you this. How do you see that sort of power dynamic shifting and/or not shifting? I mean, you know, I mentioned Albany, I would also connect it to what’s going on politicallyin the country?
MCDONAlD: Yeah, I was just going to say, I think you need to look at the timing too with the midterms. Like it couldn’t have been a worse time to sort of blindly—not ignore, but just try to cut out a constituency that had was feeling a renewed sense of, “Oh my god, maybe we do still have a say.” And maybe Cuomo was just getting a little too arrogant to sort of put that into the mix too because was it not the same time that we were served the secret L train rehab plan which is still not even…
BALDACHIN: . And no one knows really what’s the truth.
MCDONAlD: And that seems that’s acceptable in Albany to say no, actually the answer isn’t something that’s going to cause all you people pain, it’s actually great news for you but I can’t explain it. So there’s a level of arrogance going in there that I think it was, you know, could this deal have gone through easier a year previous? Maybe, because you had a lot of people on the left nationally, but also, even locally, just sort of wondering if the world had completely gone to hell and it was never to coming back again. I think they got caught in a bit of a bind by people waking up and being a little more enthusiastic about what the power of the people can do. So I think that totally played into it.
BALDACHIN: Yeah. Ari, any thoughts on that sort of broad political context at the moment?
WALLACH: Yeah, I mean, you know, this will sound funny coming from a table of three older white dudes, but the sudden realization by older white dude, some of them maybe even younger than me that, that people of color, especially women of color, have been traditionally cut out of all of these conversations, but didn’t necessarily always have the tools to push back. That realization is now coming to fruition. And it’s now manifesting in what we’re seeing and this goes back, this is Florida, this is Stacy Abrams, like across the board, the ability to kind of just shove things through is no longer going to be taken. And so I think this coming when it did, it had that extra energy behind it. And I think in that way, folks need to realize that this is the beginning or the middle of the end of that older way of doing Albany, like Albany is synonymous with just that back room dudes making decisions. It needs to come to an end. It’s coming to an end. And I think it’s coming to an end nationally. And in some ways I’d say internationally. It speaks also to this kind of Neo populist moment, both obviously on the right but also on the left, where there’s a level of power rebalancing that those who traditionally been in power are not necessarily recognizing is happening. And they have a strategy for what they’re going to do. But a strategy, as my friend Mike Tyson says. that everyone has to get punched in the face. That punch in the face is happening across the board. And again, going back to what I said earlier, we will continue to see this. I see yellow vests and what happened at HQ2 happening in France as some of the same dynamics that are playing out in terms of elites pushing an agenda without either building consensus or speaking to the folks who are usually at the tail end of those policies getting screwed. These things are all coming back. And we’re going to start seeing more and more of this. And my hope and desire is that the biggest lesson that comes out of this for Amazon around HQ2 but in general, all actors is that they need to be thinking critically about putting new mechanisms in place. So not so they can get in front of this in terms of PR communicationsbut in terms of democracy, in terms of literally thinking about how people are brought into the conversation about major things that will impact their life, not post facto, but a priority of that. And our governance systems that go back hundreds of years, it’s kind of a republic model itself, because of—I mean, we have this book by McLoone on the table—because of the kind of digital evolution is something that everyone’s take very, very seriously. And this Albany model, as both metaphor and real is ending.
BALDACHIN: The corporate subsidy piece of this, we haven’t necessarily. We touched on it a little bit, but I guess, having read more and more about this over the last, you know, in preparation for this taping, you know, I think I would say that, you know, again, as I mentioned earlier, you know, you saw a lot about $3 billion giveaway, but when you drill down on it the corporate subsidies were not nearly as bad as advertised. They were tied to jobs. They were tied to development. Certainly, the way the decision-making went down, merits criticism but I don’t personally think the subsidies merit criticism. There’s been much worse that’s gone pretty much unnoticed by the broader sort of New York intelligence/community activist.
So what are we left with? We’re left with bad process. And we’re left with the somewhat, you know, legitimate but I think difficult argument of it would have caused displacement, it would have changed the character of the neighborhood. But in some sense, that’s just development. That’s a trade off. There would have been a ton of jobs and a ton of revenue.
Net-net, how do you feel about it looking back? Let’s take Amazon out of it for a second because in some sense, they are maybe not easy to criticize, but they’re pretty big target. How do you feel about it coming away? Do you think it was a win and a net good? What lessons do you draw?
MCDONAlD: You know, Ari was just talking about how the old model of, you know, with an eye to the politics of it is hopefully changing but we’re at a point in history too where there’s a parallel, where it appears that there may be cracks in the foundations of shareholder capitalism, right? So the other stakeholder argument doesn’t just apply on the level of different communities within a city like New York. It’s also the corporate world is being asked to answer questions like, what about the other stakeholders that you deal with beyond your shareholders? And I think one of the, to me, and you know, I wasn’t in those meetings, so God knows, but I think that it was easier for this deal to fall apart than it might have otherwise been because it was Amazon.
Ari started by saying focusing us on their maniacal devotion to their customer. So they have customer and shareholders covered. That’s it. They don’t have a great track record with communities, they don’t have a great track record with the taxpayers, with paying their fair share of taxes. So I think you had a vulnerable entity here at a particular moment in time. So I think it’s good news. Not that it didn’t happen but that it may be an indication that it’s not just shareholders above all anymore.
BALDACHIN: The other thing I’d point out…And I’d love Ari’s input on this, sort of just lessons learned and what you draw from it. Well, let me say this, I mean, vice v Amazon, I think one of the things that motivated the resistance was the example of Seattle. And we heard at the panel we were all at on Wednesday night on this topic, that in fact, there were activists from Seattle that came out to Long Island City and met with the resistance in Long Island City and Queens, and basically gave them ammunition about what Amazon has done to communities in Seattle, driving out service workers and people of middle to low income out of the city, making i unaffordable. So, we didn’t have to guess about that. And I think Amazon specifically had a lot to answer for there.
But Ari, if you could wave a magic wand, and you could get your middleware session, and you could get the openness. So let’s assume it was done in the open in a much more trying apparent way that Cuomo didn’t bypass the city council. He didn’t so rile up local politicians that they actually flipped. You had politicians who were in favor of HQ2 who ultimately were driving forces against it, like Gennaro, like Gale Brewer. Had process been open—and let’s assume that with an open process, this would have gone down, would that have been a good thing from your perspective?
WALLACH: Yeah, I mean, if I had my magic wand, so Deborah Huff, who’s one of the co-leaders of Make the Road New York, who’s kind of at the tip of the spear for the resistance. In my magic wand, the site selection committee would have met with her on day one, said, “Look, we’re looking at coming to New York. This is who we are. This is what we do.” At that point, she could have said, “No, thanks. We don’t want you here full stop,” and that would have been one conversation. But I’d like to think it’d be like, a little bit more open. In my magic wand, her and the folks that she represents and works with and other organizations would have been in that process all the way through because you can’t foist a business model on everyone for ever and expect it to work in the long term.
So I would like to think Jeff Bezos is thinking about what is Amazon 200 years from now, and for it to exist 200 years from now? Most companies don’t, majority of them burnout after about 50, 60 years. For it to be here 200, 300 years from now, it’s going to have to meet the needs of all stakeholders, not just those with Prime accounts, which is us, but everyone across the board…
BALDACHIN: Is there anyone who does not have a Prime?
WALLACH: Yeah. Let me drive a very specific example, so the Amazon go store, which if you’ve been in one, you go in, you swipe your phone…
MCDONAlD: It’s cashless.
WALLACH: It’s cashless. You go and there’s a barcode on your app, you go and you take whatever you want off the shelves, put in your pocket and walk out. Sounds great, right? San Francisco just passed a local ordinance that says you cannot have cashless stores. Why? Because there’s, depending on the numbers that you look at, 35 to 55% of the community is unbanked. They don’t have a smartphone or they don’t have a credit card, so they actually can engage in commerce. So now those in charge of Amazon Go are trying to figure out how do we meet the needs of everyone? I’d like to think in my magic wand world, that this is something that would, instead of having to be an ordinance, and something that’s retroactive in a kind of in my middleware, ideal state, this would have been conversations beforehand, and actually not so much for Amazon to kind of solve for it in a traditional engineering way but actually say, “Oh, you know what, if 30 to 40% of a population within a city are unbanked, and Citibank and the big banks aren’t willing to meet those needs, we’ll do it. We’ll figure it out. Disruptive innovation isn’t just meeting the needs of the top 10%. It’s ideally the needs of 100%. And so in my magic wand…Well, I’m not saying Amazon is going to become a cooperative and like, maybe it is, right?
BALDACHIN: Uber enlightened good guy, right?
WALLACH: Well, it’s enlightened but it’s thinking about the business models of the previous several centuries are not going to work anymore because they are based on the piracy of the actual shareholder, the one who holds the shares, and not the not overall all stakeholders. So my magic wand, this would be…And look, I read Bezos, the letters that he writes every year; they’re these amazing letters that really gives you an insight into how he and the company are thinking. And in this year’s letter, they talk about failure, how do you learn from failure?
And I think the learnings from HQ2 hopefully are not we need to hire better public affairs firms, it’s what do we do to meet the needs of as many people as possible so that all flourish, not just who own the stock, not just the hundred thousand dollar tacklers, but in the communities that we work with. So my magic wand, this is a learning moment and a failure for Amazon and other companies to think about, how do they in the 21st, 22nd, 23rdcentury do what they’re going to do in a way that doesn’t increase the polarization, the inequality and the bifurcation of society as we know it? Because what I can tell you as someone who’s run businesses is an unequal hype-polarized, bifurcated society is bad for business.
And when I see gridlock, be it in Albany or the City Council or in Washington –and this will sound like I’m advocating for something I’m not advocating for a strongly. I’d like to think that good corporate actors will be able, not so much to fill the role of governance systems, but will lead the way and driving that innovation. Because I don’t necessarily see that coming from the elected at this current moment in time.
BALDACHIN: You’re an optimist?
WALLACH: I’m an optimist.
BALDACHIN: That’s from the Amazon perspective. From the community, Long Island City, Queens, New York City perspective, how do you see it? In other words, lessons learned for Amazon? Maybe. Yeah, but five years from now are we going to wake up and go, “What were we thinking?”
WALLACH: The poll that came out last week, I wish I had the number, you may have it in your brilliant research, is that the actual people who lived in that area, who lived where it was going to go, wanted it. And so that’s where I think there’s a failure of the system, like if they wanted it, but there were these massive protests, like what…
BALDACHIN: I mean, that’s its own dynamic, the loudest…
WALLACH: They’re own dynamic. The loudest got it and now you have folks who like there like, “Wait a second.”
BALDACHIN: Yeah. That’s kind of what I’m going after.
WALLACH: Yeah, that was a missed opportunity, obviously.
MCDONAlD: Yeah, but it’s…You know, we just saw yesterday Netflix is having a relatively more modest expansion. But, you know, New York City, this was not the last opportunity we ever had. This is a vital city, and will continue to be, and we don’t need to, you know, get down on our knees and beg Amazon to come here on their conditions, right?
MCDONAlD: You know, I can understand the position that a politician are in where they need to…
BALDACHIN: Show jobs.
MCDONAlD: Yeah, they’ve got to show that they’re doing something, but it’s hardly the last big company or even the last big tech company that is going to come to the city with a proposal to bring a whole lot of jobs here. So you know, mistakes were made but I’m an optimist both about what it signal but also for the city, like Amazon misplayed this just as much as the other side.
WALLACH: I think everyone was everyone missed…You don’t have to have a winner and a loser in this, like you can just say we miss played this across the board. Some would argue, “No, it’s great Amazon is not here, we didn’t miss playing at all. This is exactly what we wanted full stop.” I think it was misplayed across the board. I think there may be some good short-term feelings. We got Amazon out or whatever but I think in the long term, it was a missed opportunity to think about how we, as a city, both with people coming inside and from outside engage in an ethical, just a way for as many people as possible. Now there are people who live in the community and they’re like, “Wait, we wanted it.” It was messy and ugly and it was not at the level of future consciousness that we would have wanted to see.
BALDACHIN: You know, by way of starting to wrap up, this been a great conversation. It’s just interesting how these things play out because my immediate rush of feeling when they pulled out was “We’re better without you. We don’t need you. We’re New York City. We will be fine. You tried to dictate. You got rebuked, let’s move on.” I kind of had that same feeling after the west side stadium died, and then we got Hudson Yards, which is a frickin mall. And I’m now dying that we didn’t have a football stadium there because I think it would have been way better.
So I guess we’ll see how this stuff all plays out. I mean, you know, weird analogy, but sometimes you think things are going to get better and they can get worse.
MCDONAlD: So less than, it all comes down to personality.
BALDACHIN: A lot of it does.
MCDONAlD: They drop the ball on the west side negotiations with Sheldon Silver, right? And, you know, was the leader of the world’s largest company distracted by some personal life stuff at the time this was all going down? Maybe, right? So it takes people to get these things done.
BALDACHIN: Let’s not over tectonic think. There’s an element of just human people blowing it.
WALLACH: But there is a good thought experiment here. It had everything been equal about the size of the …How many jobs are going to come out of everything, but the company was run by Oprah.
BALDACHIN: Right. That’s kind of where I was getting.
WALLACH: Yeah, would it have been different? I mean, not everyone gets a car, right? Like you get a car, you get a car, you know, like would it have gone down and look differently? I don’t know. But that’s…
WALLACH: If they think about it, it’s always about the individuals, it’s always about the humans. Again, I hope everyone involved doesn’t see this as total failure and total success, but uses that as a learning lesson. And actually it drives— we’re having a conversation about it right now. And I hope it drives a conversation about what do we actually want for the future of our cities, and for the future of New York, for the future of our city? These are conversations that we actually don’t often have, right? We think about who’s the next leader or the broken subway but like, when was the last time we had a real honest, like, what is New York over the next several decades? What do you want it to look like? People have different ideas and different narratives. But this should be a great opportunity to actually have that conversation and I hope, amazing that we’re doing here, but I hope it’s done by a broader, more diverse, inclusive set of actors in a coherent way. So instead of this just kind of happening, “out of the blue…”
BALDACHIN: Ad hoc.
WALLACH: We actually have to use my own idea in turn, like we have a long path for New York City, like what do we want to do over the next several decades? Who’s involved in that decision making? What is the framework and this kind of values based scaffolding that we use to have that conversation and make those decisions? We just don’t have. And by the way, most cities don’t have that, most countries don’t have that. And I’ll go out on a limb and say, global civilization doesn’t have that.
WALLACH: Most individuals, like why do I make these college? We are wired to be short term, amygdala feeling, emotional entities. It worked really well for the past hundred thousand years ago in the plains of the Serengeti, but now we have to make really complex decisions that are transgenerational, and we just don’t have the frameworks to have those conversations.
BALDACHIN: On that note, on that very philosophical note, I’m going to wrap up and thank you guys very much for I think a really engaging conversation. We’ll have many more, let’s hope, on this program, in this studio and otherwise, so thanks for coming in guys.
MCDONAlD: Thank you.
BALDACHIN: All right