Roll out the tax break bidding war for Amazon HQ#2

Amazon want to build a second headquarters with some 50,000 workers. Expect the tax break war to begin:

Amazon is seeking proposals from local, state and provincial government leaders, and says it is focusing on metropolitan areas with more than 1 million people. It is also looking for areas that can attract and retain technical workers and “a stable and business-friendly environment.”

News of the search has unleashed a wave of speculation about where the world’s largest online retailer could set up shop. But experts say the company’s decision is likely to be as much about politics as it is about logistics and incentives. Bezos has been a vocal opponent of President Trump’s immigration bans, and earlier this week was among hundreds of tech leaders who urged him to reconsider his stance on the “dreamers” immigration program…

Among the criteria it will consider, Amazon says, are tax exemptions and other incentives, including relocation grants and fee reductions. “The initial cost and ongoing cost of doing business are critical decision drivers,” the company said in its request for proposals.

It added that the location does not need to be in an urban or downtown location, or a development-prepped site. The site should, however, be within two miles of a major highway and have access to mass transit. Amazon said it will give priority to existing buildings that are at least 500,000 square feet and undeveloped sites that measure about 100 acres.

Here is the actual language from page 6 of the RFP:

AmazonRFPp6

This may seem like a perfect scenario for locations (cities and states) to offer tax breaks: the company is growing, it is a major player, and it comes with a large number of jobs. Headquarters are a status symbol for areas but this one includes real jobs and a high-status company.

However, I would still argue a tax break war is a bad idea. Here are a few reasons why:

  1. There will be one winner and a lot of losers. Those who do not win may just offer even deeper breaks to the next possible company. When does this stop?
  2. A massive tax break will offset at least some of the benefits of the headquarters. While it is hard to pass up 50,000 jobs, significant tax breaks mean local governments and residents get less than they might otherwise.
  3. A bidding war puts Amazon in the driver’s seat and may have local governments begging for this. A victory would wipe out groveling but going all in on an offer and losing may reduce the status of a location. (Think of unsuccessful Olympics bids in the past.)

The locations involved could be many but this will not turn out well for many or maybe even all.

Let Amazon’s big data tractor trailer drive to you

Americans like big trucks and hard drive space so why not put the two together?

Amazon announced the new service, confusingly named Snowmobile, at its Re:Invent conference in Las Vegas this week. It’s designed to shuttle as many as 100 petabytes–around 100,000 terabytes–per truck. That’s enough storage to hold five copies of the Internet Archive (a comprehensive backup of the web both present and past), which contains “only” about 18.5 petabytes of unique data...

Using multiple semis to shuttle data around might seem like overkill. But for such massive amounts of data, hitting the open road is still the most efficient way to go. Even with a one gigabit per-second connection such as Google Fiber, uploading 100 petabytes over the internet would take more than 28 years. At an average speed of 65 mph, on the other hand, you could drive a Snowmobile from San Francisco to New York City in about 45 hours—about 4,970 gigabits per second. That doesn’t count the time it takes to actually transfer the data onto Snowmobile–which Amazon estimates will take less than 10 days–or from the Snowmobile onto Amazon’s servers. But all told, that still makes the truck much, much faster. And because Amazon has data centers throughout the country, your data probably won’t need to travel cross-country anyway.

One could make a strong case that semis make America go. And all the money that the government has put into highways and roads certainly helps.

The massive traffic generated by an Amazon fulfillment center

Labor practices in Amazon’s warehouses may be one issue but another issue for nearby residents is the traffic around the facilities:

Traffic grinds to a halt for miles when the fulfillment center’s more than 4,000 employees are going in and out of the facility during rush hour.

Robbinsville Mayor Dave Fried is threatening to sue  Amazon over the traffic that’s clogged area roads after a senior official failed to show at a meeting to discuss the problem…

The company’s fulfillment center, called the “busiest warehouse on the planet” is located on New Canton Way in the township…

In a statement on the township website Fried says:  “Children cannot get to school, residents cannot pull out of their driveways, and this has become a very serious public safety issue.  According to police department crash data, there have been 25 accidents that can be attributed to workers coming to and from the Amazon warehouse over the past six weeks, compared to just one accident over the previous six weeks.”

A common NIMBY concern about new developments is the traffic generated. Nearby residents complain about the traffic associated with schools, churches, shopping centers…basically, any sort of new development, particularly in more residential areas. Sometimes, these concerns seem like a stretch: a smaller church is really going to disturb local streets all week long? Yet, traffic can truly be an issue for an area is the roads can’t handle all the new volume. This Amazon facility in New Jersey is a good example: all the sudden, thousands of vehicles are now flooding local roads at relatively short periods. This is why the staggered start and stop times might be a good solution; roads are often constructed to handle rush hour type flows but they typically only happen twice a day and the roads sit emptier for much of the rest of the day. (Carpooling might be another good suggestion – how many Amazon workers drive solo? – but getting Americans to do this consistently is quite difficult.)

This is also a good reminder of the physical world footprint of an online company like Amazon. The products may come through the mail but all the infrastructure happens somewhere and affects various communities.

New cultural gatekeepers: paid online reviewers

After recently discussing buying Twitter followers, the New York Times explores another new online realm: paid online reviewers who only give extremely positive reviews.

In the fall of 2010, Mr. Rutherford started a Web site, GettingBookReviews.com. At first, he advertised that he would review a book for $99. But some clients wanted a chorus proclaiming their excellence. So, for $499, Mr. Rutherford would do 20 online reviews. A few people needed a whole orchestra. For $999, he would do 50…

“The wheels of online commerce run on positive reviews,” said Bing Liu, a data-mining expert at the University of Illinois, Chicago, whose 2008 research showed that 60 percent of the millions of product reviews on Amazon are five stars and an additional 20 percent are four stars. “But almost no one wants to write five-star reviews, so many of them have to be created.”

Consumer reviews are powerful because, unlike old-style advertising and marketing, they offer the illusion of truth. They purport to be testimonials of real people, even though some are bought and sold just like everything else on the commercial Internet.

Mr. Liu estimates that about one-third of all consumer reviews on the Internet are fake. Yet it is all but impossible to tell when reviews were written by the marketers or retailers (or by the authors themselves under pseudonyms), by customers (who might get a deal from a merchant for giving a good score) or by a hired third-party service.

I am most intrigued here by the possible change in relationship between a reviewer and an author. The article suggests there is some sort of “sacred” distance between the two: the reviewer is free to criticize the work without recrimination. Some reviewers have attained elite cultural gatekeeper status, people who guide decision-making for millions of people. Think of critics like Siskel and Ebert and Robert Christgau who are seen as authoritative figures. Hence, people are upset when they learn that a positive review they saw wasn’t an “honest” opinion but rather a business transaction.

However, let’s not forget that these reviewers also make careers out of their thoughts – they may not have sold out to a corporation or a product but they do have a financial interest. I would argue that this distance between reviewer and author/creator has never really been so sacred and there are plenty of areas where we are used to paid reviewers. If you follow a reviewer enough, you can often learn what they do or do not like. Indeed, some reviewers have become outspoken proponents of certain movements and not others. Is this based on a completely rational, detached perspective? Of course not. Don’t many reviewers interact with the people who are producing the products they are reviewing? Think of blurbs on the back of books: are these truly unsolicited comments or from people who are truly judging the merits of the book? More crassly, commercials often present “reviewers” or “real people” or people made to sell certain products. Perhaps this is simply a sign of our times and will become normal as there is clearly a market for good reviews.

It will be interesting to see how websites like Amazon, heavily dependent on user reviews, works through this issue. I always try to read both the five star and one star reviews when considering a product. Additionally, there are other issues: the ratings can be about the product itself or a particular aspect of the product or about people’s expectations for the product or the shipping or the customer service or something else. I think Amazon could include a few extra questions, as other websites do, that would help one sort through the variety of reviews. Overall, the system is not perfect and we should be aware that we may not be getting the “unvarnished truth,” but at least it is better than going off anecdotal evidence from a friend or two…right?

A call to “begin creating synthetic sociology”

Two academics call for “synthetic sociology”:

Well, it’s time we begin creating synthetic sociology. Along with Nicholas Christakis, I recently laid out the potential for this new field:

We wanted to see if this could be done in humans. Like crabs, humans have specific kinds of behavior that can be predicted, in groups. To harness this, we created a survey on Amazon’s Mechanical Turk, surveying lots of people at once.

We asked a couple hundred people to complete a string of 1’s and 0’s, and asked them to make it “as random as possible.” As it happens, people are fairly bad at generating random numbers—there is a broad human tendency to suppose that strings must alternate more than they do. And what we found in our Mechanical Turk survey was exactly this: Predictably, people would generate a nonrandom number. For example, faced with 0, 0, there was about a 70 percent chance the next number would be 1.

From this single behavioral quirk, it is theoretically possible to construct a way in which a group of humans can act as what is known as a logic gate in computer science. By running such a question through a survey of enough people, and feeding those results to other people, you can turn them into what computer scientists call a “NOR” gate—a tool to take two pieces of binary input and yield consistent answers. And with just a handful of NOR gates, you can make a binary adder, a very simple computing device that can add two numbers together.

What this means is that, given sufficient numbers of people, and their willingness to answer questions about random bits, we can re-deploy humans for a purpose they were not intended, namely to act as a kind of computer—doing anything from adding two bits to running Microsoft Word (albeit really, really slowly).

On one hand, it sounds like we are far from using these methods to have humans finish complicated tasks yet, on the other hand, this continues to build upon research about social networks and how information and other traits can be passed along and built on in a group of people. As these academics suggest, we have come some distance in recent decades in understanding and modeling human behavior and advances are likely to continue to come in the near future.

This also isn’t the first time that I have heard of social scientists using Amazon’s Mechanical Turk for studies. For a relatively small amount of money, researchers can find a willing group of participants for experiments or other tasks.

Occupy Wall Street to occupy Black Friday?

There is a report that some Occupy Wall Street protesters want to take the movement to national retailers on Black Friday:

Some demonstrators are planning to occupy retailers on Black Friday to protest “the business that are in the pockets of Wall Street.”

Organizers are encouraging consumers to either occupy or boycott retailers that are publicly traded, according to the Stop Black Friday website…

“The idea is simple, hit the corporations that corrupt and control American politics where it hurts, their profits, ” states the Occupy Black Friday Facebook page.

A few of the retailers the protesters plan on targeting include Neiman Marcus, Amazon and Wal-Mart.

Besides wondering how many people will do this, it raises other questions:

1. Would most or even a sizable minority of shoppers welcome the protesters? I would guess not. People might think that the income and power situation in the United States is unequal but that shouldn’t get in the way of good sales.

2. Why are certain corporations singled out in this list (though they do suggest going after the top 100 retailers)? Why not Target? Walgreens? Kroger’s? Costco? If it is all big corporations that are the targets, will the protesters be evenly distributed or will they go for the typical targets like Walmart and McDonald’s that are often tied to sprawl and excessive consumption?

3. How exactly does one have a visible protest at Amazon.com? I guess the group could take over the comment boards. If Deadspin can prompt so many responses that ESPN can’t keep up, maybe Occupy Wall Street can do the same.

4. If protesters show up en masse, what will the response of stores be? Is the parking lot of Walmart a public space? (I assume not.)

What’s good for Amazon.com may not be good for California (or America)

Even though I just used this phrase (“What good for [company X] is good for America”] when looking at the impact of AT&T on American history, I agree that the deal Amazon is trying to offer California, jobs for no sales tax, is a bit strange:

Amazon has spent more than $5 million loading up their More Jobs Not Taxes campaign for a referendum that would repeal the legislation that started charging them taxes. Meanwhile, the latest turn in the political fight has been that Amazon offered to create 7,000 jobs if the state postpones enforcing its sales tax on the company until 2014.
Here’s why that offer is a big deal. It transforms a debate that is fundamentally about a value — fairness — into a numbers game. The next step will be that Amazon’s political operatives will plant the seed that the bill will kill jobs, probably a nice round number like 7,000 of them. According to our calculations, the politicos will say, California is killing the exact number of jobs that Amazon offered to add! Taxes are bad!
I don’t mean to pick on Amazon here. Every company is after as many tax advantages as they can get. Walmart, for example, which pushed the effort to get the Amazon sales tax bill passed, skirts some online sales taxes, too. And every company has realized that it is good politics to say that taxes kill jobs, whether they have real evidence for it or not…
Now, by transforming tax fights into skirmishes over how many jobs this or that tax will “kill,” every single tax becomes something that hurts America. The narrow (and self-serving) interests of every tax-fighting corporation become part of our national project. And the battlefield becomes the competing spreadsheets of political opponents who say that one plan or another will create more jobs, when it’s pretty obvious that no one knows precisely how that whole mechanism works.

Some observations:

1. Perhaps taxes are supposed to be about fairness – but corporations and municipalities have been playing this tax break game for years. Why wouldn’t Amazon think that it has enough clout to pull this off? Many communities and governmental bodies have been more than willing to give in to others.

2. The math is interesting: no sales tax = 7,000 jobs. I haven’t seen many details about this: does the value of these jobs equal the sales tax revenue that would be lost without Amazon? Couldn’t California hold out for more jobs or make this information public to try to worsen Amazon’s hand?

3. It is interesting that this battle about sales tax revenue between California and Amazon is getting attention; a number of states have already gone through this. Granted, California is bigger so perhaps this is about more money than elsewhere. But, additionally, California was home to some of the biggest property-tax revolts in the United States several decades ago, meaning that homeowners, and not just corporations, are interested in paying fewer taxes.