Did Milwaukee Ever Even Have a Chance for Amazon’s Second Headquarters?

Amazon didn’t give Milwaukee a second look for the company’s second headquarters, but we did.

At least it didn’t come down to Tom Barrett reviewing wind chimes on Amazon. In October, as the deadline approached for cities and states to enter a bid in the sprawling e-commerce company’s competition seeking a site for an additional, secondary headquarters, Kansas City Mayor Sly James bought 1,000 items seemingly at random – boys’ underwear, Taj Mahal blues recordings, a chunk of limestone – from the online seller and wrote five-star reviews for each, weaving in his city’s low-cost wonderfulness. Regarding a set of Amazing Grace Wind Chimes, he wrote, “These wind chimes are music to my ears. … When I’m sitting out in the backyard of my reasonably priced home in a safe neighborhood with great schools, and these chimes start to tinkle, it feels like the whole world is singing just for me.”

The chance to replicate the growth around Amazon’s Seattle headquarters spurred 238 bids to host its second hub.

Not every politician was so eloquent in the competition’s final days. Other state and city leaders promised to throw money at Amazon for a shot at becoming the next Seattle. New Jersey offered $7 billion in incentives, and little Stonecrest, Georgia, promised to found a new municipality called “Amazon, Georgia” for the company. Like many localities, Milwaukee and the Milwaukee 7 regional economic development group opted to keep their combined proposal confidential, other than to say the city was strategically situated in a triangle of talent with Madison and Chicago.

Out of 238 applications, ours failed to make the cut to 20, with medium-sized metropolises like Columbus and Raleigh in the running alongside obvious contenders such as New York and Los Angeles. While our bid for the so-called HQ2 project was probably a long shot, its dismissal has much to say about the area’s tech economy.

Amazon wants an HQ2 because it plans to move beyond its existing lineup of Whole Foods grocery stores, massive online retail, cloud services and household electronics (Echo, Fire TV) “to do everything,” says John Bergman, founder of Guild Software, a game developer based in Milwaukee. “They’re a frugal company that values absolute project ownership and control, so when they look to enter a new industry, they often choose to build everything themselves.”

Doing so requires either acquiring a new company or hiring a large number of people, and our tech labor force was probably too small to supply the latter. At a monumental 8 million square feet, HQ2 is expected to eventually employ 50,000 people, a mixture of professionals, engineers, technical experts and other workers. But according to the Bureau of Labor Statistics, in 2017, there were only 33,050 tech workers in the Milwaukee area across all workplaces. And according to the Public Policy Forum, our tech labor force only increased by an average of 3.5 percent annually between 2005 and 2016, slightly faster than the national average. The number of tech workers in Indianapolis – an Amazon finalist and the Midwestern city with the most vibrant tech hub – grew at about twice that rate.

“Our disqualifier was definitely not size. We don’t have real growth. That’s an inherent challenge.” — Blair Williams

The Indiana capital’s cluster of tech companies has been developing for decades, according to Governing magazine, and jump-starting a new one here just to attract HQ2 would be nearly impossible. At the center of the Indianapolis boom is a nonprofit organization called TechPoint that’s run cooperatively by the tech sector, university leaders and investors to push recruitment, training and other cluster-supporting initiatives. If Amazon had a problem or needed backup, it would have a single phone number to call. Milwaukee doesn’t have an organization like this focused on tech for people to rally around, although groups like Startup Milwaukee hold related networking and learning events.

“We have pockets of tech and 21st-century jobs and programs popping up at different universities,” says Matt Cordio, the organization’s co-founder, “but we don’t have an integrator.”

HQ2 could have motivated people to move to Milwaukee, something with which the city has had little success on its own. State and local universities produce plenty of scientists and engineers, but not many stick around after graduation – their ranks grew only 12 percent between 2005 and 2016. That’s only slightly better than treading water during a span that saw the debuts of the iPhone, self-driving cars and other forms of serious artificial intelligence.

Milwaukee also falls short on metrics measuring attractiveness to millennials and overall availability of jobs, according to Blair Williams, president of development company WiRED Properties and managing director of real estate for the Milwaukee Bucks. Amazon cares about cities’ general economic climate because it wants to see a vibrant local scene, not a struggling locality looking for a bailout. Williams thinks we missed the final 20 not because Milwaukee was too small – the similarly sized metros of Nashville, Raleigh, Columbus and Austin made the cut – but because of our merits. “Our disqualifier was definitely not size,” Williams says. “We don’t have real growth. That’s an inherent challenge.”

Recent investment figures suggest a stagnant economy in the area, and Amazon would rather plant its garden in fertile startup soil than rocky. The Milwaukee area drew just $44.57 million in venture capital in 2016, compared with $485 million in Minneapolis and $975 million in Austin. Venture capital is often what allows tech startups to grow from a few people to a medium-sized company with a serious payroll. And perhaps even worse, the number of small businesses in Milwaukee shrank by 5 percent between 2005 and 2015, a span during which the national average rose 5 percent.

Amazon is also looking for a location with a strong transportation network, and while Milwaukee County has a bus system, the regional network is lacking. Efforts to establish a regional transit authority that would collect sales taxes to fund transit have failed, and in 2010, Gov.-elect Scott Walker refused federal grant money to build a high-speed rail line between Milwaukee and Madison.

Five of Amazon’s HQ2 contenders

Metro population: 2.1 million
Current tech workers: 68,260
Known for: Barbecue and live music

Metro population: 2 million
Current tech workers: 34,510
Known for: The Indy 500

Metro population: 1.8 million
Current tech workers: 27,360
Known for: Attracting millennials

Metro population: 1.6 million
Current tech workers: 33,050
Known for: Frozen custard and lakefront vibes

Metro population: 1.2 million
Current tech workers: 35,980
Known for: Rapid economic growth

Other plans for a “KRM” line between Kenosha, Racine and Milwaukee also ran aground, leaving just the Amtrak to Chicago. While the Brookings Institution has observed that a large chunk of the finalist cities have middling transportation networks, ours, when coupled with our labor force issues, could have been a death knell. We may have a regional triangle, but for transit, it’s only got one weak arm – the Chicago-Milwaukee Amtrak line.
Wifi-equipped rail lines, on the other hand, “allow tech commuters to work during a commute, which is the kind of productivity data that Amazon might well consider,” says Bergman of Guild Software. If you take 50,000 people and give them two extra working hours between the morning and evening commute, that works out to about 11 years of extra productivity every day.

The company’s big hunt has been called a circus, and it probably knew more about the 238 applicants than their elected leaders, according to Bergman, given the company’s reputation for collecting and weaponizing data. “Amazon probably had about five real municipal targets before they ever announced the RFP,” he says, “and they probably have about the same five now it’s done.” The payoff for HQ2 was getting cities all over North America to dream up incentives and review wind chimes.

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On the other hand…

Wherever Amazon’s HQ2 lands, it’s expected to cause a serious constriction in traffic and a large expansion in the cost of living. Seattle passed a local minimum wage in 2014, $15 an hour, to help hourly workers, and last fall, a candidate for Seattle mayor, Cary Moon, encouraged the company to build its new HQ elsewhere: “Maybe we can grow a little more slowly in Seattle.”[/alert]

‘In Amazon’s HQ2 derby, did Milwaukee ever have a chance?’ appears in the May 2018 issue of Milwaukee Magazine.

Find it on newsstands beginning April 30, or buy a copy at milwaukeemag.com/shop.

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Matt has written for Milwaukee Magazine since 2006, when he was a lowly intern. Since then, he’s held the posts of assistant news editor and, most recently, senior editor. He’s lived in South Carolina, Tennessee, Connecticut, Iowa, and Indiana but mostly in Wisconsin. He wants to do more fishing but has a hard time finding worms. For the magazine, Matt has written about city government, schools, religion, coffee roasters and Congress.