By: Amazon recently announced that they are seeking a home for their second headquarters – HQ2. In the request for proposal (RFP) , Amazon plans to hire up to 50,000 employees with an average annual compensation of more than $100K within 10-15 years. From a capital expenditures standpoint, Amazon plans to spend $5B on this new headquarters. This means that the city Amazon picks as their next home will see upwards of $10B of either employee compensation or capital expenditure.
In order to provide context, Amazon highlights the impact they have had on the Seattle area over the past several years. In brief, they estimate that their investments from 2010-2016 resulted in an additional $38B to the city’s economy. They also highlight that every dollar Amazon invests generates $1.4 to the overall economy. Extrapolating this out means that Amazon’s 2nd HQ will see somewhere in the neighborhood of $14B in contribution to the local economy they will call home.
From the progress that this company has made since being founded, it is clear that Amazon is a juggernaut that is likely to continue to aggressively expand sales, build a larger operational footprint, and positively impact the economy through job creation.
As you might imagine, these statistics mean that Amazon has a lot of choices when considering options for their second headquarters. However, I believe that Chicago’s emerging entrepreneurial scene, top-tier universities, affordable, world-class values, multiple entertainment options, substantial real estate development and amazing transit uniquely qualifies Amazon for success in the Midwest.
What does Amazon Want?
In the RFP, Amazon outlines their preferences:
- Metropolitan areas with more than one million people
- Stable and business-friendly environment
- Urban or suburban locations with the potential to attract and retain strong technical talent
- Communities that think big and creatively when considering locations and real estate options
On the surface, these characteristics are encompassed by many cities. However, I think it is important to go one level deeper and think about the type of company Amazon is has been since their founding in 1994. In reading through their annual reports, Bezos and his team are big thinkers who value continuous innovation and improvement from their team. In fact, their thoughts on Day 1 versus Day 2 mindset are very insightful:
- Customer obsession
- Skeptical view of proxies
- Eager adoption of external trends
- High-velocity decision making
By moving beyond the traditional tax incentives and other financial sweeteners that are often offered in these types of packages, I think that Chicago differentiates itself by what we have actually done over the past several years that encapsulates our Day 1 approach. This actions have created the ideal environment for Amazon to call Chicago the home of their second HQ.
What does Chicago Offer?
Chicago offers a climate and a culture that is constantly improving and re-making itself to become the leader solution provider for the challenges of tomorrow.
- Emerging entrepreneurial ecosystem: 1871 - is a non-profit digital startup incubator located in the Merchandise Mart, Chicago, Illinois. The organization was founded in 2012 and is the flagship project of The Chicagoland Entrepreneurial Center (CEC), a non-profit organization that supports entrepreneurs on their path to building high-growth, sustainable businesses that serve as platforms for economic development and civic leadership. Led by CEO Howard A. Tullman, 1871 has become a major hub of Chicago's technology and entrepreneurial ecosystem and hosts over 400 early-stage companies as well as nationally recognized accelerators, industry-specific incubators, and tech talent schools. In fact, 1871 was ranked #1 in a study of North American business incubators.
- Why entrepreneurial ecosystems matter? Large companies will always have blindspots. Despite their best efforts to develop the world class innovations of tomorrow, they will sometimes miss. However, startups are uniquely positioned to develop those solutions from the ground up and 1871 provides an environment like no other. This can help reinforce the innovations that Amazon develops internally.
- World-class colleges & universities – Illinois is home to some of the most amazing universities on the planet. From the University of Illinois to University of Chicago and Northwestern, our institutions have consistently educated the leaders of tomorrow. Recently, 3 of our universities were ranked in the top 100 worldwide.
- Why our education institutions matter? Amazon plans to be an innovative solution provider for the customers over the long haul. In their RFP, they mentioned that they will hire 50,000 employees over the next 10-15 years. Some of the roles in artificial intelligence, data science, robotics and automation that they will be hiring for don’t yet exist and so you need a talented, educated workforce that prepares their students to see around corners and anticipate what is coming next. Illinois institutions excel at this training.
- Housing affordability - The greater Chicago area is one of the most affordable metropolitan areas in the country. In a recent study, Chicago was ranked #8 for US cities and #13 globally. However, when you compare the characteristics of these cities, Chicago is more affordable than San Francisco, New York City, Boston, Washington DC, Seattle, Los Angeles, and Miami. In fact the two cities that Chicago was more expensive than are Detroit and Houston. While living in the city center can be quite expensive, there are several suburbs in/around Chicago that are accessible by public transportation.
- Why housing affordability matters? While other cities can be less expensive, they don’t offer the same creature comforts as Chicago. Chicago has a world-class dining and entertainment scene which makes it easier for employees to enjoy their time outside of work. And, as property values rise because of the desirability, employees are able to build wealth and improve their overall standard of living.
- Real estate development – Drive around Chicago and you will see that there are large projects in the West Loop, Fulton Market, Wrigleyville and River North which will continue to improve our great city. Not only will this increase housing and commercial options, but it will create a more dynamic urban population.
- Why real estate development matters? More and more people are opting to move to cities. In fact, by 2050 it is estimated the 70% of the world’s population will live in cities. However, without more affordable options, this will be limited to only the most wealthy citizens. Chicago is taking steps now to not only democratize housing stock and availability but also we have substantial geography to create large urban metropolis.
- Diverse economy – Chicago is fortunate to have a wide diversity of industries within the economy. As someone who worked in Detroit for a few years, I can not stress the importance of not having a major metropolitan area dependent on a single industry (automotive). Diverse economies help drive sustainable growth over the long term.
- Why does economic diversity matter? Not only is Chicago's portfolio approach superior, it also means that it is easier for spouses and partners to find employment within our economy when key employees relocate to the Midwest.
During my life, I’ve been fortunate to call Seattle, New York, Boston and Chicago home. However, there is an intangible nature to Chicago that is hard to explain. But, I think it is captured by the quality of the people. The Midwestern work-ethic and humility along with the friendliness to others creates an environment that Amazon will be able to easily plug into. In the business world, they often talk about the synergies that are created when two distinct organizations combine to accelerate greater value going forward.
With the history of success for omni-channel retailers like Sears, I think Amazon would be wise to select a Day 1 city like Chicago for their next headquarters. They don’t call us Second City for nothing!