Santa Amazon is Coming to Town

Santa (Amazon) is coming to Town

You better watch out
You better not cry
Better not pout
I’m telling you why
Santa Claus is coming to town
He’s making a list
He’s checking it twice;
He’s gonna find out who’s naughty or nice
Santa Claus is coming to town

Wait, it’s not Santa Claus… No, no, not Santa at all. Even better! It’s Amazon!

Santa Amazon is coming to town
He’s making a list
He’s checking it twice;
He’s gonna find out who’s naughty or nice
Santa Amazon is coming to town

For residents of Queens, New York, and Arlington, Virginia (home of Infrastructure Ideas), Santa Claus came a little early this year. After a year-long search process that gathered widespread headlines, Amazon, one of the largest companies in the world with a market cap not far under $1 trillion (yes that’s a big number — fewer than twenty countries have a GDP of $1 trillion), announced that its second headquarters would be split between New York City and Arlington. Each of the two cities is expected to receive, as a result, some 25,000 new jobs and at least $2.5 billion in new investment.

Now, not everyone in New York or Arlington is necessarily thrilled, and the incentive packages offered to Amazon to choose one location or another have been criticized in many places. But still it’s a pretty big deal, and in Northern Virginia at least the announcement received positive marks — of around 75% according to opinion polls. In Arlington the disruptions stemming from Amazon’s arrival sound manageable, given the already strong and growing tech talent pool in the city and a large amount of new office space. Amazon does not intend to build new construction for probably another 6-7 years, and to mostly utilize existing space. And announced plans are heavy on walkability and connections to existing mass transit infrastructure.

Why write about this in Infrastructure Ideas? There is one less obvious aspect of what’s happened in this search process that is of particular interest to the infrastructure community, and on which we’ll focus here. This develops the theme articulated in Nick Tabor’s “Intelligencer” column, published in early December by New York Magazine. The column’s title is “Amazon is an Infrastructure Company.”

This interesting twist should give infrastructure planners, operators and investors pause. Let’s unpack the story a bit. The fuller title to Tabor’s column is “Amazon Is an Infrastructure Company. The HQ2 Bids were Reconnaissance.” Tabor notes how much information was acquired by Amazon in the course of receiving bids to host their second headquarters, and in all likelihood how this information will be far more valuable to the company than the explicit incentives offered by various locations. He also notes how Amazon is evolving rapidly from a pure retail company – its origin and still how the world sees it – into a company specializing in infrastructure. Amazon now has one of the largest logistics operations in the world, with more than 250 warehouses, an integrated shipping operation with its own vans and drivers (not to mention its alliances with traditional shippers), and a cloud-computing service. It is expanding the warehouse network rapidly, has floated a plan to open 3,000 stores – automated, no cashiers – within three years, is building its own air-cargo hub and leasing a fleet of branded planes.

Looked at from this angle, Amazon can indeed be thought of as a logistics or transportation company. Probably one of the largest in the United States already. And unlike most American logistics companies, it is already international. For infrastructure planners, the idea of attracting an Amazon facility because of job creation is… fine. But its impact as a logistics provider is arguably much higher. State and local planners, or national planners in different countries, should be thinking about partnerships with an Amazon first and foremost for its logistics expertise, capabilities, and likely investment. Amazon’s business model, where it wants to be in the middle of online sales from virtually everyone to everyone, should incline it to listen favorably to proposals aiming to create shared benefits between it (in terms of faster deliveries) and local infrastructure planners – with much of the capital coming from Amazon. Or, capital coming from Amazon and infrastructure financiers: for logistics investments benefitting local economies are often undertaken in the form of Public Private Partnerships (PPPs), and financed through stand-alone entities. A potential opportunity for infrastructure planners and investors (and competition for existing logistics operators).

Its not just Amazon. As the big tech companies keep expanding, Google-Alphabet and Apple and others, infrastructure becomes increasingly important to them. They discover the kinds of infrastructure constraints that more traditional manufacturing and service companies have known for decades. And, unlike smaller companies, and unlike most governments, they have the money to do something about those constraints. Google-Alphabet is already a major investor in new vehicle and energy technologies. In the future, for governments looking for partners to help address long-standing infrastructure issues, Santa Claus may be coming to town in a big red technology suit.

Ho Ho Ho !

——- * ——

That’s it from us for 2018. Looking ahead to 2019 in the spirit of the season, expect your gifts from Infrastructure Ideas to include:
• A look back at 2018 and 10 predictions for 2019
• Some good news on climate (really, there is some)
• How coal may become the next Big Thing – even for Green Banks
• Continued updates on the changing landscape of mass transit and urban mobility
• More infrastructure disruptions in the air

To all our readers across the globe, we wish you a “Happy Holiday” and a good start to the New Year!

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