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Amazon HQ2: New Evidence Boosts Boston’s Odds

21 Apr 2018

When it comes to managerial brilliance, there is nothing quite as appealing as Amazon’s first shareholder letter that highlights the importance of thinking about every day as a chance to rethink how to make its offer to customers ever-more valuable than competitor’s. Compared to that, the free publicity that Amazon has garnered in the wake of its competition for HQ2 — the second headquarters expected to create 50,000 jobs and generate $5 billion in investment — pales in significance.

Still, that publicity is not nothing — and it ought to get many cities thinking about why there is so much of a disparity between the small number of cities that attract most of the economic activity — meaning corporate headquarters and startups — and what the rest should do about it.

While Amazon announced 20 finalists in January, it has not shed further light on who would win. But new evidence — in the form a study by the Conference Board — suggests that Boston and Washington are neck and neck for Amazon’s HQ2.

Amazon is looking for talent and would have an easier time if that talent is close to locations where it already operates. As MarketWatch reported, the Conference Board found that the fastest growth in online listings for such talent — specifically computer engineers, marketers, managers, and accountants — was in Boston and Washington. It also argued that Amazon already has a big presence in both places.

I think of Amazon as a publicly traded startup — so it stands to reason that it should choose between these two partially on the basis of which region has a better cultural fit with its startup mentality.

And that is reflected in Amazon’s concept of Day 1 — namely that a company begins to fail when its stops reinventing itself to meet ever-rising customer expectations.

Boston’s business culture has a long tradition of encouraging the commercialization of new ideas from young founders. As I wrote in Startup Cities, this stretches back at least as far as 1957 when American Research and Development, a venture firm founded by HBS professor Georges Doriot, who swapped $70,000 for a 70% stake in Digital Equipment Corporation.

Boston’s startup scene kept inventing new companies that went public and enriched local investors — until the dot-com crash. Since then, Boston has been surpassed aggressively by Silicon Valley.

That’s because Boston VCs are locked into a mentality of investing mostly in experienced founders who make technology that solves business problems — whereas Silicon Valley is home to the biggest companies whose business models depend on advertising to consumers.

Despite the concern that Boston is now in Day 2 mode — in Amazon parlance this means resting on your laurels, it still leads DC when it comes to attracting startup capital. After all, the Boston area attracted $7.5 billion in capital for startups in 2017 compared to $2.5 million in the DC area, according to PWC MoneyTree.

Source: Forbes