The Overpay Critique

It is so easy to look at a headline announcing a deal and say “they overpaid.” I have done that myself plenty of times. It’s a natural emotional reaction.

But what I have learned is that you can’t really critique an investment until you know how it plays out.

Some things that look so expensive turn out to have been bargains in hindsight.

And, of course, some overpays are just that. Prices that nobody can make money on.

The current debate raging in NYC about the Amazon deal that the Governor and Mayor made reminds me of that.

Everyone is saying “they paid billions of taxpayer dollars to the richest company in the world” as an argument that they overpaid for the deal.

But this line in the Mayor’s OpEd yesterday in the Daily News got my attention:

New York City alone will net $13.5 billion in tax revenue from the new headquarters, and the state another $14 billion. That’s a nine-fold return on our investment

If these numbers are correct, the billions NYC and NYS spent to incentivize Amazon to come to NYC, will have been a great investment. 

We would take 9x on our money any day at USV.

It is easy and natural to critique an investment on the headline number. But the headline number is only half the story. You really need to see how it pans out to know if it was an overpay.


Comments (Archived):

  1. PhilipSugar

    As I said I New York had to offer the money and they most certainly will get a return.I do not like the fact that they and every other city basically were forced to provide a legal bribe that is not available to other companies.I am upset that our system of government allows this not that New York did it.

    1. awaldstein

      I can’t imagine a deal without negotiations. Public or private.That is how I see this. Not as bribery but simply the course of events.Just as NYC should have demanded coverage on housing

      1. Matt Zagaja

        It feels like pretty bad tax policy to have special deals and rules for some players while the little guy doesn’t get that. It is not the kind of command and control capitalism that many of us have signed up for. It certainly is not economically efficient to require that anyone who wants a fair shake has to go hob nob with the politicians. It does not scale.The crux of the question is, and we will likely not know the answer, would Amazon have picked their location despite the incentives? If the answer to this is yes, then New York got played pretty badly. If the answer is no, then they made an incredibly smart move.Knowing some of the folks working on HQ2 related things in Boston one of the interesting components to the Boston bid was that the development plans were not much different regardless of whether Amazon showed up. The city and state offered something up, but many of the “incentives” were just an inventory of existing programs that are widely available.Also other folks have astutely pointed out that Amazon is not exactly the most neighborly company in Boston/Cambridge. While it is nice they have been expanding in Boston anyways, their presence is not really felt. I do not see them sponsoring hackathons or other events the way GE and others have. They haven’t even bothered to join the Kendall Square Association like the rest of the tech companies in their neighborhood.

        1. falicon

          For whatever it’s worth, Amazon has already been pretty active and present in NYC…the AWS loft is an awesome resource, they often host events, classes, and talks…they work with all the incubators and startup programs I know about…as well as most of the VC and investors.

          1. PhilipSugar

            I would love for NYC to have won this deal because of all of the effort they put into improving their infrastructure and being the “place to be” And without any incentives allowed I think they probably would have.Think about this, how much time and money was spent by cities that lost instead of spending all of that energy on their citizens.Think about the amount of arm twisting and backroom deals that were done by those cities to put together their proposal.Think about the incentives it puts up even for people like me to say I am going to move to another location and get a special deal.

          2. falicon

            Only tangentially related, but this is the same thing I say/think about when it comes to developer “contests” and most “hack-a-thons” too.Sometimes the “prizes” are too compelling, but for 90% of the participants/attendees, the time and effort would be better spent on other things (even just a straight up tech. networking event).Also – on the global level this is the same issue we face in competing with China.If you’re going to compete on price (or for price), it’s going to cost you one way or another.

          3. LE

            Because there was a deadline that focused people from an external force. Normally you don’t have that. Human nature.You know when you do renovating you have to give a deadline that the contractor feels is super important.Like ‘we have a wedding at that house in June so the jobs has to be done’. Not ‘we need it done by the summer’. Chance of not meeting a deadline is way way less if people feel there is some target that can’t be moved. It gets them to focus and move other things to the side.

          4. Matt Zagaja

            Well it’s good to hear they’re a bit more present in NYC. Wish they would do more here, but fortunately Microsoft and many other places are pretty good at filling that hole in our ecosystem.

        2. JamesHRH

          Treat people fairly, not the same.

          1. PhilipSugar

            No, the definition of a true conservative is you believe in equality of opportunity not outcome.

        3. awaldstein

          Lots of truth here.As the owner of small businesses, i get this.I still think net net its a good thing for the city.

        4. LE

          It feels like pretty bad tax policy to have special deals and rules for some players while the little guy doesn’t get that.’Big’ customers always get better deals. It takes a great deal of work to structure, supervise and negotiate with 1000 small companies vs. 1 large company. So part of this makes sense. Some of this is simply economy of scale. If you buy 1000 cars you will get a better price than 1 car.Now you could argue that it’s trivial to simply offer a deal to everyone. But then in theory it’s not a strategy and negotiation. Then what happens is your competitors (other states) instead of competing will just match you. They will offer the same or a similar deal. Or even a race to the bottom. Everyone loses. The individual process (which as mentioned is inefficient for large numbers of participants) prevents much of that from happening (the numbers offered are secret let’s say).Make sense?

          1. Andy Chiang

            Doesn’t make sense because you’re putting it in the context of private entities. The government is a public entity and is funded by the public. Therefore, negotiating like a private entity (in this case giving massive incentives and breaks to Amazon) is crony capitalism.

          2. LE

            ‘Massive’ is not the net result of the deal. Buying for $10 million and selling for $12 million is not overpaying. It’s about the net result.Public companies are also funded by the public.And of course negotiating is negotiating. This is not socialism.

          3. Andy Chiang

            $1B+ in incentives in NYC alone might be small for Amazon but not small for companies in NYC.…You bring up a good point about public companies being funded by the public, but this deal is not opt-in like if you’d invest in companies in the public market.

    2. iggyfanlo

      Philip I think your point captures the response exactly. To me, it’s another example of the inequality baked into the system and it’s so pervasive it’s not even hidden anymore.In the past these blockbuster “tax loss/tax gain” deals were paraded around because the response was one of “growing the pie”. However now the response seems to be more of “here we go again; the big guys get the largest slice”.This fuels even greater populism, something I believe we’d rather avoidAs Fred correctly points out, it’s probably a great deal for NYC and it would be unwise to turn the opportunity down, however I think it needs to be accompanied with the sharing of the spoils.For example, we anticipate to net $27 billion after accounting for increased tax revenues and therefore we are dropping the income tax rate by XXX% for all New Yorkers”.I think the folks of the Empire State could get behind that

      1. Rob Underwood

        This is a good point. I don’t think there is enough articulated about how this deal will benefit, in concrete terms, the average New Yorker who is expected to get behind the deal. Will our taxes do down because of this windfall in new tax revenue we’ll get down the road? Will the subways get improved faster? Will our schools be better funded and what much does this mean for the schools I know near me? It’s mostly just been (very large) numbers drawn out with little shown in terms of concrete benefits for the “John Q Public” NYC/NYS taxpayer.

      2. LE

        The people who are jealous are those who either don’t remember or don’t care to remember the way NYC was in the 70’s. For an idea of what it was like watch ‘The taking of Pelham 1 2 3’ or any other period movie. My dad passed on buying a small apartment building for $300k. An entire building it was in midtown I think. $300k. Not rent controlled either.The reason that NYC feels so good to so many people is simple. The money and the affluence have made it a safe nice place. Actually true for many other cities (including Philadelphia).In Philly for example the idea of living in ‘Center City’ in the 70’s (or before) was unthinkable. It wasn’t safe and it had no appeal. Now it does. Much of that is being driven by younger people and a cool vibe with restaurants and entertainment. But more importantly the balance has shifted in terms of occupancy which makes it feel safe. You can walk around NYC (or other major cities that have been revived) after working hours and will see more people ‘like you’ than you would have 30 or 40 years before.NYC also rocks because once a week since the early 70’s there is this big advertisement which is Saturday Night Live. Believe it. You don’t probably but it is great free PR. And of course the network news broadcasts all come from NYC. Plus it’s a destination for those with more ambition that leave other places (gutted). Kind of like the US is a destination from other countries. It makes sense that it is where it is.

    3. William Mougayar

      That happens everywhere, not just in the US. Cities around the world provide business incentives. Without jobs, cities lose their growth and vibrancy.

      1. PhilipSugar

        Absolutely. But to everybody. You want to have a development zone like Western NY……yeah it smells a bit fishy to me but everybody can take advantage of the opportunity.Want to do a development zone in a blighted neighborhood. Again I don’t love, but it’s not a one off deal for one company.

        1. LE

          Actually the true evil is people bluffing to leave, getting credits, who have no intention of leaving where they are.This comes across as a win win for the city and economic development people and of course the company. But in truth it’s just a self serving failure of negotiation on the part of the city because they have an incentive to allow it. The reason is they can say that they saved things. If they call the bluff they can’t. What do they get?So it works like this. Company says ‘if we don’t get X we leave’. City and econ development people offer some deal to ‘keep them from leaving’. Sure there is the chance they aren’t bluffing but truth is they probably are. An example is what happened where I am where companies (driven by a local behind the scenes business owner who controls the state senate) threatened to move across the river (30 minutes away) if they didn’t get incentives. So they ended up in Camden. Truth is they would never have moved across the river no way. Tax is almost 5% higher there (Philly wage tax) plus bridge tolls plus employee base in in NJ. So chance is super small. Plus execs don’t want to schlep across either. They end up with a great deal. Meanwhile adjacent county loses all of those jobs. How does that make sense? County to County. A great win? No.

          1. PhilipSugar

            My point exactly. Never did but have seen it done.Look at this Happy Harry’s Drugs sells to Walgreen’s. https://www.delawareonline….Get’s a big grant to stay for a bit and then leaves.Founder, CEO takes on job as Delaware Director of Business Development https://leadershipdelaware….Does a deal with Fisker the car company and DE get’s HOSED.…Delaware isn’t even Bush League, maybe a Single A baseball team which we have. New York is playing in the big leagues as the Yankees when it comes to this stuff.People that think a ton of that money is not earmarked for projects that eventually line somebody’s pockets, believe in Santa Claus, The Easter Bunny, and the Tooth Fairy.

          2. LE

            Just scanned all of that.Re: fisker – Interesting that the story talks about the $400k that the state is on the hook for for utility bills.How much do you think lawyers working on this (for the state) made in billable hours working for the state? My guess is that it was vastly more than $400k. Millions. In addition to the other money they lost (millions).Now sure some of this is just luck and unavoidable. But when you think there are various parties that stand to gain if the deal is approved then most normal people (who gain) are not going to blow the whistle. Look the other way. Or rationalize their concerns.This is what happened with the $2b casino down the shore (the Revel) that went bust within 2 years of opening. Impossible to believe that none of the people involved knew it couldn’t profit or even stay alive in that market.Alan B. Levin sounds impressive resume style until you realize that what he did was all based on a company that existed that his father built. And what he did after that was built on that solid base which he grew from. Fine. But it doesn’t make him super like people want to believe.Hah! His Innovation Capital Partners (where he is no longer affiliated) invested in ….. hmm…. you know who).

          3. LE

            One of the doctors mentioned in that New Yorker article had his medical office where I also owned an office. Dr. Richard Paolino. I was there the day the Feds came and raided him. I remember telling them he had dumped various medical records in the dumpster and they didn’t care at all about those files for some reason. I didn’t know him well but had to gain access to his unit when I wanted to pull some fiber optic cable through the building. In the parking lot there were always undesirables hanging around I guess they were there getting drugs…. https://uploads.disquscdn.c

          4. jason wright

            Small world.I googled him while reading through the article. What a stupid thing to have done. I’d rather declare personal bankruptcy than risk going to prison for +30 years.

          5. Adam Sher

            The Navy Yard KOZ is a great example of Philly’s ability to cannibalize its tax revenue and hurt land owners.

      2. RiganoESQ

        Sure, but politicians etc. are always quick to point out “jobs”. Yes the 9x return is great for the local economy, but its also important to recognize macro-economic factors and the reason(s) why anti-trust laws were implemented. I am a frequent user of Amazon + AWS, but are such operations beneficial to society as a whole (is total output > input)? +NYC subway system needs A/C 😉

    4. JamesHRH

      I think it’s great.Maybe people will stop electing Kwames –… – and focus on people who can grow their city.A rare positive for DeBlasio, who is a horrible mayor.I agree that the Ron Conway approach is the right approach here. Price was pretty much irrelevantBTW, the logic that they get 9x doesn’t mean they didn’t overpay.

      1. PhilipSugar

        If I move or grow 100 Amazon type jobs (I’d actually have to pay more than them) to NYC do I get $6mm in credits? If so I have no issue.

        1. LE

          You don’t. This is my theory on why it’s good for car dealers to rip people off . It leaves more on the table for me to negotiate down. If a fixed offer (price) then I don’t have any advantage. The average person does though.In all seriousness (I wouldn’t use the word ripoff of course) it’s kind of standard in deal making that not everyone gets the same deal.

        2. JamesHRH

          Don’t know.Have you asked?Doubt you get the same deal, 8 jobs is nothing in NYC. I would suggest that DE might pay up though.

          1. PhilipSugar

            It’s a hell of a lot more than eight. Most people here spout opinion. I back it up with specifics. See my post of yesterday and today.

          2. JamesHRH

            Misread your comment, not an insult.Spirit of comment remains – if you can grind DE to keep your 100 + high end jobs there, you should.

    5. Lawrence Brass

      After the 2008 bailout, nothing regarding money and the economy upsets me anymore.Capital is abundant. It is all about access and equal opportunity in the end.

    6. sigmaalgebra

      That the rich get richer is an old story. In college I had a course in German. Later the course was good to have because for the foreign language requirement for my Ph.D. I translated a math paper in German! That German course had some old German literature, e.g., Goethe and also the Heinrich Heine poem:WeltlaufHat man viel, so wird man baldNoch viel mehr dazubekommen.Wer nur wenig hat, dem wirdAuch das wenige genommen.Wenn du aber gar nichts hast,Ach, so lasse dich begraben -Denn ein Recht zum Leben, Lump,Haben nur, die etwas haben.Heinrich Heineor from a Google translationWorld Run If you have a lot, you will soon Much more to get. If you have only a few, you will Even the few taken. But if you have nothing, Oh, let me bury you Because a right to life, Lump, Only have those who have something. Heinrich Heine

    7. jason wright

      The Gilded Age, returned. Did it ever really go away?

  2. jason wright

    “If these numbers are correct” – Politicians under pressure suddenly become very numerate. What’s the source of this alchemy, audited?”You really need to see how it pans out to know if it was an overpay.” – So if this deal pans out to be an overpay will Jeffery be writing a check?…”Unfortunately, our website is currently unavailable in most European countries. We are engaged on the issue and committed to looking at options that support our full range of digital offerings to the EU market. We continue to identify technical compliance solutions that will provide all readers with our award-winning journalism.”

  3. falicon

    True of all spectator sports.

    1. fredwilson


    2. PhilipSugar

      You are completely right and I don’t like those deals either.

  4. LIAD

    moreover there will be endless unquantifiable positive externalities for local and city businesses such as restaurants, hotels, grocery stores, residential landlords, airbnb hosts etc etc ad infinitum.painting this as anything other than a net win for the city’s various stakeholders is stupid.

    1. kidmercury

      Lol, that is a fun insult, will be sure to pass it along to the LIC residents who get priced out of their homes

      1. Richard

        Inflation destroys economies. We had a simple recipe to success in this country, affordable housing, affordable education. The policies that aided and abetted housing and education inflation over the last 50 years will be studied for centuries to come and shown the two of the trojan horses to defeat capitalism.

        1. kidmercury

          yep….all goes back to inflation and debt… supply growth:…bankruptcy growth:…lack of money undermines family creation, resulting in explosion of children to single parents:…key turning point is clearly somewhere around late 60s. i wonder what the major monetary event could be…..

      2. LE

        Upvoted for humor. Vera Coking would laugh also.pass it along to the LIC residents who get priced out of their homesTaking the other side of this does the ‘first man over the bridge’ really have some right to hold back progress and/or commerce that benefits another group at their expense? [1]What about all the ‘whiners’ who never want roads built though their neighborhoods? What if we cared the same about them?What about Vera Coking who tried to hold back a Casino. Sure nobody thinks a casino is important (other than now AC is up the creek because they aren’t doing so well) but let’s say it was a hospital that priced out residents? And not Amazon?…[1] And isn’t that an indictment of our whole system?

    2. jason wright

      “unquantifiable positive externalities”Say what? Theresa May’s Remexit slippery speak comes to AVC.

      1. JLM

        .Bullshit meter clanging.JLMwww.themusingsofthebigredca…

        1. LE

          When the brain receives a phrase it can’t parse what it does is going into sleep mode and ignore any of the words that follows until it wakes up and begins listening again. It’s a good way to slip in something that you don’t want the other party to understand but still say it.Similar is drug commercials. They juxtapose happy scenes visually (or music) with words of caution about the downside of the drugs. I study those commercials. Works of art.Seriously watch this Humira commercial. In particular at about the 20 second mark. Look at the guy meeting the parents for the first time. Look at the visual. This is a work of art!…Really look at the scenes and the cuts. This is so good. Millenials.

      2. Richard

        AKA ass kissing

  5. Salt Shaker

    My understanding is this deal is performance based, with incentives linked to job creation. de Blasio’s numbers are predicated on AMZN meeting those performance goals in full. It’s a variable or conditional deal. Conversely, the needed investment in infrastructure (roads, subway improvements, sewers) is hardly variable or conditional, it is a fixed cost. Do you really trust the Mayor and Governor’s ability to negotiate a good deal for this city, skirting the City Council and all other sounding boards? These guys will be long gone before any of this comes to fruition. They’re both interested in solidifying their political legacies w/ aspirations for higher office, hoping this deal transpires into a windfall for a cash strapped and mismanaged city. I could more reasonably argue city financials are so dire it’s a bet the city could ill afford not to take, but you’ll never hear that’s the case.

    1. fredwilson

      I trust the Mayor and Governor over the city council and the state legislature. But that is a low bar you have created for me

      1. JLM

        .John Gotti v Al Capone?JLMwww.themusingsofthebigredca…

      2. Rick Mason

        We had a case in Michigan under Jennifer Granholm where they awarded $9 million in credits for someone promising jobs in Flint. Guy posed for a picture with a smiling governor and an oversized check.Who would put jobs in Flint? Turns out a twice convicted embezzler and it was all a con hatched from a spare bedroom of a friends trailer. He went back to prison and Gov. Granholm left the state for California. But she gives one hell of a speech every four years at the Democratic National Convention!

    2. LE

      Long gone – Great points.A gamble, even with a good deal, is still a gamble.The Mayor and the Governor will be out of dodge before anyone knows if it was a good idea. As such their downside is very small compared to the immediate bolus of the upside.Trivial to talk away after the fact their approval and/or involvement if it doesn’t work from the old age home.[1]

    3. Adam Sher

      I’m tempted to compare the Amazon HQ2 deal to a sports stadium for all of the reasons you mentioned. However, 25,000 jobs isn’t a lot for the metro so how much extra will the greater NYC infrastructure be taxed? Sports stadiums tend to crowd out other businesses, which creates a net loss across the gambit of economic metrics. Will HQ2 crowd out other businesses? I don’t think the parallel goes that far so I suspect HQ2 will be a net good for the area.

  6. iggyfanlo

    Perhaps the net gain of $20 billion plus could be used to fund a universal basic income experiment with thousands of needy New Yorkers?

    1. fredwilson

      Or fix the transit city and metro region transit systems

      1. iggyfanlo

        Another solid proposal and long term investment in NYC

    2. jason wright

      When hell freezes over.

    3. Richard

      Ha! What a joke! Let’s focus on the Social Security unfunded liabilities and the costs of 70 million US citizens on Medical before your next round of redistribution.

  7. Imran Patel

    I wonder if the anger seething in many people today – both in response to the HQ2 news and as part of the roiling public climate generally – is less to do with whether or not the deal is financially sound and more pointed at the expected recipients of its rewards? This Amazon development is easy to paint as part of a broader narrative of perceived growing inequality, locally and nationally. What are your thoughts on whether companies should be responsible for fostering the kind of broad-based prosperity that accounts for concerns a bit beyond maximizing shareholder value in the first place?

    1. fredwilson

      Inequality has many causes. It is easy to point at things like this and the uberwealthy and the companies they founded and say “off with their heads”. But that won’t solve inequality.We need to go to the root causes. Lack of education. Lack of the right dynamics in the home. Lack of pathways out of poverty. Unconscious biases in our society. And many many more

      1. JamesHRH

        Inequality is about success.Success is a social metric.Social metrics are measurements of conformity.Unconscious bias is an interesting topic as it seems to play a part in conformity but it’s a non factor.

      2. LE

        Yet some cultures have managed to work themselves out of poverty in the exact same place and under far worse circumstances. So what is the difference?

      3. LE

        How do you reverse the general attitude of the people in some of these communities? That is near impossible to do.What have I said is the biggest advantage of going to Wharton/Penn vs. a public or even private college? What did I say was the biggest advantage of going to a public school vs. a private school? Not the education. The environment of high achievers from ‘good’ families.So it was that you are surrounded by high achieving people that take what they are doing seriously and for the most part are not slacking off. And that drives the entire group in a certain direction.What do you have in some of these communities? You have the exact opposite. You have the collective attitude and the community dragging you down.My guess is that you’d literally have to transplant people to a completely new and better environment. So you remove the influence of the neighborhood.Did I mention the time I looked to buy a business that was owned by two former union workers? I showed up for the appointment on time. They were both sitting on the floor eating lunch ‘lunch time’. They made me wait for 10 minutes until they finished lunch. They were union guys and that is what you did in the union. Even though they were owners now that attitude still prevailed in their head. That really did happen. And no it wasn’t a strategy they were using for any other reason.

        1. Adam Sher

          If you haven’t, read Hillbilly Elegy. You can’t overstate the effect your environment has on your outcome. 1, your family expects you to perform well; 2, your peer group has high aspirations; 1&2 guide you to college; 3, your collegiate network connects your aspiring group to the market that wants those people

          1. LE

            I haven’t read it but I am always surprised at how many older people don’t know this just seat of the pants by being observant of life around them. They had to read a book to have the point planted in their brain. Kind of like zoo animals and rich people with spectacles.That said there are cases where growing up with little ends up giving you motivation to change your circumstances. And having parents that nurture and spoil you works against you getting ahead. You then lack the push.You know all the things I have now I couldn’t have as a kid but wanted them. So that was a big motivating factor. Of course I didn’t grow up in poverty either. But it’s the same concept. My Dad of course came here with Zero (not even parents or siblings).Truth is though most people are really average and mediocre by definition. They aren’t going to go anywhere because they are happy with a simple life and just basic needs being met. They are not the people that Albert Wenger talks about with UBI who Albert thinks will all the sudden (with UBI) do artistic or creative things or learn. That is not the average person. The average person can’t wait until Friday and calls Wednesday ‘hump day’.

      4. Richard

        Truth is that most of the Amazon employees will be middle income in NYC. Housing is the biggest issue for middle income startup families. The federal govt and large state government should be breaking up their footprints and incentivizing companies to locate in new cities and building new infrastructure for the 21st century to accomodate it. Shame on Jeff Bezos for being so short sighted. This was the first crack in his armor.

      5. Twain Twain

        When the tools that are supposed to help measure and eradicate unconscious biases don’t do as they should — yet are used by techcos in their recruitment practices, it becomes clear why+how the diversity numbers in tech sector has fallen from male:female 65:35 in 1995 to 82:18 in 2018. It could be as low as 88:12, by the way. Techco’s are known to do “creative headcount” by assigning UX designers as engineers too.TechNewsWorld: “More than 20 years ago a male-dominated tech industry began creating AI systems to help hire more tech employees. The tech industry then decided to hire predominantly men, based on the recommendations of unconsciously biased machines.”https://www.technewsworld.c…*…*

        1. PhilipSugar

          You know my business partner (BIL) and I had this discussion.Anecdotally we completely agree with you on history having done this since the 1980’sAlso both having daughters we anecdotally disagree with you on the root cause for the decrease today.Somehow as we train great young girls (under age 12) they change around then and don’t want go to Delaware Charter, but want to go to Cab Calloway School of the Arts.Nothing scientific but we think it is peer pressure. Sometimes you don’t need AI but just observation.Have found this a ton. People like me that hunt buy clothes at Walmart before opening the day before Thanksgiving……no brainer.

          1. JamesHRH

            Scandanivian countries lead the world in gender equality.They also lead the western world in ‘traditional’ gender career choices.Stereotypes are observed before they become accepted and they have to become widely accepted before being vilified by people looking to ‘fight the power.’Most girls don’t like machines.

          2. Twain Twain

            It may be an idea to keep the “pipeline problem” of getting 12-14 year old girls into STEAM separate from the “leaky pool” problem of 21+ year old women already working in tech finding that their performance reviews are consistently undermarked so they don’t get promoted into technical leadership. Moreover, surveying systems have been set up by male psychologists in ways that disadvantage women in tech.Emily Chang, Recode 2018: “In 1960s, a company called SDC, a software company at the time, hired these two psychologists, William Cannon and Dallas Perry, to develop a personality test to find the best programmers. What they determined by interviewing about 1,400 programmers, 1,200 of whom were men, is that good programmers don’t like people. They like things better than people.And it perpetuated this idea that the only people who could this job are antisocial male nerds. Because if you’re looking for antisocial people, the research tells us that that favors men over women. These tests were hugely influential. They were used by tech companies for decades and it perpetuated this idea that antisocial male nerds are good at this job. And therefore we should encourage that.”I’m building a classification system to counter about 100+ years of psych surveys that have been measuring people in biased ways and those approaches have a huge effect on why the Valley has been unable to classify words appropriately to solve the “fake news” problem.@fredwilson:disqus — It’d be good for USV’s portfolio companies to stay away from those “unconscious bias” surveying systems.It’s not obvious but all swipe left/right, click “like” serves to bias the data that then trains the AI. That’s why the biases are as endemic as they are.https://uploads.disquscdn.c…The challenge for me is that I’m the only person who knows how to code a different system. There are 3+ million engineers (mostly male) who only know how to do binary UX and bell curve approaches to data analysis and machine learning.

          3. PhilipSugar

            Here is the thing, when we first started our careers, there certainly were more men but not an overwhelming majority.Today when we interview we literally get one female candidate out of 80 potentials. That is just plain sad.We have 20% female in our tech area, and let me tell you that was a struggle and an accomplishment.On our Lego league team we have 50% girls but that is sixth graders. They certainly have as much or more talent than the boys. But we hear them talk, about what they want to do in high school (I think we make people specialize way too early, another discussion) and they don’t want to do technology. When you spend four hours a week for 26 weeks a year for three year with kids they talk bluntly in front of you.We are having a NASA scientist come in this year for our project theme (I had to push a business trip). We have coached her to make sure she pushes the girls (I know that is an agenda but I figure they get pushed the other way)I am not a woman and I am not an employee therefore I am self aware enough to realize my viewpoint is from a 50+ privileged Ivy League male business owner. But from my view it is not what happens when women have a job, it is getting them qualified to have the job. Most people are delighted to get more diversity and bend over backwards to do it. Zip Code Wilmington has the same percentage of females that I do, we talk about it.

          4. Twain Twain

            Hat tip and “Bravo” to you for plugging away at it.It’s definitely a culture and education issue. In China, CS is being taught to pre-schoolers of both genders. Male:female STEM graduates is 60:40 and in a Beijing university quantum physics class it’s around 65:35.It’s half that in the US.

          5. PhilipSugar

            It is and it’s not just female. Frankly people of Asian and Indian descent are as over represented as males.

          6. LE

            (under age 12) they change around then and don’t want go to Delaware Charter, but want to go to Cab Calloway School of the Arts.Wow exactly my experience with my stepdaughter.Prior to ‘the changeover age’ she is into Lego League, paints a green screen in her room so she can make videos, even plays with some tools in the basement iirc. Then all the sudden somewhat slowly she becomes more ‘girly girl’. Like concerned about her looks (makeup and a hair straightener), clothes and so on.Importantly to point out that most of her friends are high achieving types who are tops in the school (Indian girls, daughters of russian immigrant engineers and so on). I wouldn’t call them a trivial ‘girly girl’ group by any means. Most aren’t really attractive. My stepdaughter probably the most attractive one of the bunch. Yesterday wanted me to pick up her friends and her from school and take them to Starbucks so they can hang out.Etc. Very smart obviously and all of that but not really interested in doing much but her school work and watching comedy videos on Netflix or Youtube. Has no desire to be the best and the brightest is not a Twain for sure (she could be but doesn’t want to be). Just wants to be a kid and a girl in particular. Doesn’t want to compete with men and rule the world. Wants to have fun. Like the song.When I was in high school I was the one who wanted to go to private school (my idea) because I knew it would be better for me long term. My sisters? They wanted to remain at the public school with their friends. Not even a small possibility they would leave that school. Another girl who started at the private school? She dropped back to public school. And another one that I also remember (family owned a rigging company). They missed the social aspect. Today if you look at her (example 1) on facebook she is a typical middle aged woman totally social.My memory of growing up? Me upstairs in my bedroom studying or in the basement doing photography or some other hobby thing let’s say. My sister? She was literally on the front steps hanging out with friends our house was the hangout. And they went to parks and they did kid stuff and that was my sisters life.My sister went to a college in Maryland and eventually got a masters and has a great job now (as does my other sister the artist one). But honestly if she wasn’t so social she could have done a great deal more. Neither of my sisters were Twains or ‘Joannes’. Also sister the artist was not social at all. A total artist.

  8. Pointsandfigures

    I don’t think Amazon chose NYC simply for the money. They chose it to expose themselves to randomness and for network. I blogged about it.You could also argue on principle of not offering subsidies to any corporation. Of course the politicians I saw making that argument aren’t consistent since they like to subsidize their favorite projects.I am also gonna call bullshit on the numbers. When has a startup’s projections ever come true. Government economists and bureaucrats always miss on projections.

    1. LE

      I agree but will add my personal theory which is the fact that NYC is expensive allows them to more easily refresh the workforce. [1] Plus it’s easier to lay off staff (god forbid) than it is in a small town or area.Think about it. You have 25k jobs and aren’t the only game in town. Would you rather lay off those jobs (say 3k of them) in an area where you are pretty much the only employer? In NYC way way easier to lop off heads.[1] In other words employees will leave because as they mature they won’t be able to afford to live and work in NYC and Amazon can replace them with lower paid workers. Remember not all of these employees will be essential and highly paid. The numbers they quote are just average numbers.

      1. Pointsandfigures

        Yes, but there is a cultural thing going on. NYC’s network is OPEN. It’s not “where are you from?” but “can you do this?” Hence, it is a lot more merit based than other places. It stems from being an immigrant town and being a financial center. SF is similar. LA is somewhat similar. Chicago is not. Dallas is not. Atlanta is not. NYC is accepting of weirdness. See David Ogilvy in 1951. He wore a kilt often. Tweed suits. Black capes. That in a time when it was the man in the grey flannel suit. He revolutionized advertising. Could that have been done in other cities of the US? Doubtful. Highly doubtful.Amazon chose NYC because of the open network. They are exposing their work force to randomness. They gave the company a chance to have a blowout idea that will jump lines. They chose DC so they could practice regulatory capture (see George Stigler’s research).

    2. Richard

      Yep, This is a Trojan horse to get into finance and advertising in NY and government procurement in DC.

  9. William Mougayar

    Of course it’s a good deal. Toronto, who was in the running would have benefited immensely, as so would have any other chosen city. This is something that puts NYC at another level, and it pins it as the 2nd Tech center in the US.

  10. kidmercury

    NYC does not have the same financial objectives as a venture fund. A city government needs to consider the distribution of outcomes, which is the real objection. In this deal, Amazon will be the primary beneficiary, and the subsequent beneficiaries will largely be a function of access and capital availability. From that perspective it is almost in contrast to the USV thesis.

  11. LE

    The first thing I thought was “where did those numbers come from?”. How accurate are they?And sure enough someone had the exact same thought ‘based on assumptions’.I think it’s bad to use assumptions to make points since it can go in either direction.Auto play ad here be forewarned:…Note also that the reports are not entirely available for review either:A separate study assessing $1.3 billion in city tax breaks and its estimated $13.5 billion in revenues was conducted on behalf of the New York City Economic Development Corporation, which did not respond to several requests for a copy.Let me ask you would you make an investment in a company based on the same type of info presented to you? I am not saying somebody didn’t check the math but it’s highly likely that the politicians are really just using info that suits their narrative…really likely. https://uploads.disquscdn.c

  12. curtissumpter

    This post assumes that the 9X ratio will actually pay off.NYC and city governments in general have a horrible track record of getting these deals to actually pay off. This entire post makes sense but only if it pays off. And if it doesn’t, unlike with investors, usually citizens are terrible at keeping track of the performance of these ‘investments’.Plus there is no accountability for the politicians/investment managers. Forget that politicians shouldn’t be investment managers because of the inherent conflict of interest. It’s that if they make bad investments all they say is ‘sorry’ while the taxpayers are left holding the bag.I’m just not sure I have confidence in this arrangement. That’s why there should be City Council and Legislative involvement. They’ll be around to hold the investee accountable. This structure (especially the circumvent) seems fundamentally flawed.

  13. Rob Underwood

    I remain a “lean yes” about the HQ2 and LIC, in large part as it’s a big marker of the progress the NY tech community has made, as well as affirmation of the investments the city and private sector have made in programs like CS4ALL NYC.I do though feel conflicted given my first hand experience with the Atlantic Yards (i.e., the Barclays Center and surrounding mostly residential development), about which I’ve written here before. (I think a big difference between Atlantic Yards and HQ2 is the amount and types of jobs).According to watchdogs of the Atlantic Yards development (e.g,. Norman Oder of Atlantic Yards Watch) that project has fallen short of delivering the benefits originally committed to the state, city, and surrounding communities (and used to rationalize eminent domain). Moreover, the clawback penalties that were part of that project, and are part of what de Blasio highlighted as a hedge to HQ2, have not been sought. See Norman’s editorial on this topic,….What worries me most perhaps is the inevitable use of eminent domain. I watched first hand my friends and neighbors have to respond to the gun to their head that is eminent domain. Just the threat of it alone makes your property illiquid. At Atlantic Yards, what came with the eminent domain threat was a contradictory narrative put forward by the developer that the media, especially the NY Times, repeated unfiltered — that the neighborhood (Prospect Heights) was at once urban blight that warranted whole blocks (and the businesses and homes on those blocks) being leveled but, at the same time, was also an up and coming “hot” area of the city desirable especially by professionals and young people. There was also the use of New York’s strong nativist streak, especially common in Staten Island, Brooklyn, and Queens, to deny those who were not born in New York City, as was the case of some though hardly all of the residents impacted by Atlantic Yards, agency over their property by characterizing them as “carpetbaggers” whose desire to not have their homes seized and destroyed was solely a selfish desire to stop progress. Every day we watched people who longer make NYC home, living off in Haverstraw or Hauppauge, claim more agency over the future of New York City than its current residents solely because their grand dad used to play stickball in the streets of Canarsie. (If you have not watched Battle for Brooklyn, in which our new state Attorney General plays a prominent role, now is the time. Trailer:…More broadly, and as editorials this week in outlets like the WSJ point out, I think it’s difficult to accept the deal, to not think the city is overpaying, in part because the subways are so delayed and crowded, NYCHA housing has so badly deteriorated, and the city now gets paralyzed by 6″ of snow. The state still owes the city schools nearly $2 billion (see http://www.whatismyschoolow…. I think the HQ2 deal would be easier to accept if there was more visible progress on day-to-day quality of life issues like the subway, but these seem to continue to get worse, not better. Imagine an HQ2 deal that came with an iron-clad commitment to completely reimagine and rebuild the 7 and F line — something that would help LIC and the city. I think it was a missed opportunity to not tie specific, concrete benefits for the city and its people to this deal. I also wonder why the Mayor’s office was not better prepared for the backlash.This all said, it’s early days, and I remain optimistic that as the deal gets further banged out we can learn lessons from the past, including Atlantic Yards, and this can become the best possible deal it can for the city and state.

  14. Lawrence Brass

    I found some clues in this Milton Friedman’s talk. :)…

  15. Jim Grey

    The criticism of what NYC gave to get this is sour grapes because (in retrospect it seems clear that) places like Indianapolis were never actually going to get this.

  16. LCDShadrach

    This is a fair and valid analysis when looking at the price paid in isolation. However, decisions that involve local/state government are part of a much larger ecosystem. There are two things that the people of NY have consistently taken issue with:(1) Both the governor of NYS and the mayor of NYC consistently cry poverty and point the finger at one another regarding blame and financial responsibility to fix the awfully neglected NYC public transit system. To then turn around and give $2+ bln in handouts to Amazon is a bit hypocritical.(2) Proper procedure was not followed to involve the communities directly impacted. As the LIC councilman pointed out, multiple community meetings and hearings need to happen to get approval for something as small as a restaurant placing a couple tables outside on the sidewalk, yet none of these same people were involved at all for a 4 million sq ft waterfront development.

  17. OldManGoldenwords

    Giving big tax break to billionaires when their company’s employees go on food stamp is a morally corrupt logic. Its zero sum game. CEO chose HQ where they want to live. Even without incentive & bidding, AMZN would have choosen NY. In that sense its waste of tax payer money, which would have been used to improve public transit etc, which in turn will help AMNZ.

  18. JLM

    .Sewards Folly, Louisiana Purchase both decried for overpaying. Worked out OK.This is 25000 jobs over 10 years. That’s fewer illegals than come through Texas in a week. This is really not that big a deal.Not that big a deal!This is the Have It Alls v the Have Mores.These jobs are coming TO NYC not FROM NYC.The idea that the Gov and Mayor got the numbers right is laughably naive. It’s a startup.Amazon doubled their “take” by splitting the deal. Think about it.Bottom line DO IT and move on.JLMwww.themusingsofthebigredca…

  19. Rob Larson

    Reminds me of Google’s acquisition of Youtube. From what I heard, afterwards a Google employee at one of their all hands meetings asked how confident they were that they were paying the right price at $1.65B.According to the story, Eric Schmidt paused, then responded along these lines: “We’re almost certainly not paying the right price. We’re either vastly overpaying or vastly underpaying for what it’s worth. We’ll know which in about 10 years.”

  20. MickSavant

    this is true, but it doesn’t factor in any risk. This is not a guaranteed return. If Amazon’s business underperforms or if they later change their minds about how many jobs they will create in NYC the return could be wildly different.

  21. Andy Rankin

    I remember when every other VC said you wildly overpaid for Twitter.

    1. Richard

      “Fooled my randomness”

  22. LE

    The other thing Amazon got by being in NYC and DC:It got a location close enough to other attractive places that would make it easy for people to migrate to for jobs.So with NYC they can draw from Boston to Philly. From DC they can draw from the South up to Philly. Even Princeton is only 3.5 hours from DC and less than an hour from NYC.Someone offered a job can still be driving distance back to their family w/o taking an airplane. Very important.This is in addition to all the other reasons they picked NYC.They don’t get that by locating in Austin Texas or Cincinnati Ohio or Pittsburgh do they?

  23. Peter Radizeski

    how did they come up with those tax figures? and over what length of time? #fuzzymath

  24. Pointsandfigures

    here is a different take for the AVC crowd:… Subsidies to Amazon Are Uneconomical, Un-American, and Unconstitutional

  25. Cbhayani

    check amazingrpahttp://www.amazingrpa.comAmazingRPA with Uipath can be used to create a digital workforce to automate repetitive tasks. That way you can maximize the productivity of your employees by giving them the opportunity to focus on more important tasks.

  26. Roy Bahat

    Having worked on these kinds of deals when I was in New York city government (ages ago, but principle still holds), the tax calculations are almost always nonsense. The direct taxes are usually both modest and waived, and the indirect involves a lot of multipliers and handwaving. The principle holds, I just don’t believe the numbers.

    1. Roy Bahat

      + after all the analysis and incentives, the determining factor in those deals was often where the CEO lives. In this case, obviously, that wasn’t the case… though I think someone did an analysis of Bezos’ various homes’ distance from the proposed new offices. (And, incidentally, looks like some Amazon employees bought homes in LIC, front-running the decision — apparently all legally.)

  27. Mark Gavagan

    While some subsidies and incentives are smart investments that will generate positive returns, many are terrible losers for everyone but the recipient. 95% of stadium subsidies are a perfect example of wasted taxpayer dollars. It seems like a good idea for the federal government to consider dimming the viability of future subsidy/incentive bidding wars that pit cities and states against one another. One way would be to create a federal law that cuts federal highway or other funding to a state or municipality by $2 for every $1 of subsidies and incentives provided to companies.