While everyone has their own views about who won and who lost in Amazon’s decision to no longer build a New York City Headquarters, one sure thing is that longer term innovation in the New York community just took a big hit. This is not simply the innovation that would happen within the walls of Amazon. This decision has also hurt the chances of new, world-changing companies from taking root in New York.
The odds of creating the next Amazon in New York just decreased considerably.
Innovation happens in hubs, in localized areas. It happens when people interact, debate and ideas clash. Cities have always been at the forefront of innovation because they promote increased interaction. They provide an opportunity for new ideas to be discussed and the opportunity for the next business plan to be written on the back of a paper napkin.
Human creativity and innovation have always thrived through the sharing of ideas. This is why Silicon Valley and Seattle are hotbeds for technology and other industries such as automobiles, finance, manufacturing, entertainment and many others are concentrated in specific regions.
Industry localization happens at every level, from fruit stands to dentist offices to medical research centers to global manufacturing centers. It is the concentration of talent, raw materials, resources and infrastructure that drives innovation in a sector. In the technology sector most of the elements for successful innovation reside in the human mind and New York just lost a big piece of future innovation by reducing the critical mass of tech talent within the five boroughs.
The 25,000 jobs Amazon would have brought to the city would have exponentially increased the opportunities for the most entrepreneurial of them to interact, collaborate and think of new ideas and launch their new businesses in New York. This opportunity is lost forever.
A recent study at MIT showed that being in closer proximity to others and the opportunity for increased face-to-face interaction drives increased collaboration. It is this collaboration that drives new thinking, new ideas and ultimately innovation.
A different study has shown that cities are hubs for innovation because when population density increases, not only does total productivity increase, but per-capita productivity also increases because of the increased opportunity for face-to-face interaction.
Amazon abandoning a NY HQ2 could not have happened at a worse time. Now and for the foreseeable future every company is a tech company, and technology will define, enable and constrain every company’s future. The industries that New York has always been known for--Finance, Banking, Media, Health Care and others--are all being revolutionized by technology.
Unfortunately for New York, the city just lost a significant opportunity for the ability of individuals thinking about innovation in these industries from collaborating and sharing ideas with fresh minds from the technology sector. As a result, the prospects for future innovation, that could result in a new wave of impactful companies, have decreased.
The innovation impact of Amazon's departure from New York that I've already discussed does not even factor in the multiplier effect. As Amazon would have set up operations in New York, other technology companies would have been drawn to the area. This would further increase the critical mass of talent and give additional opportunity for idea exchange and innovation both within the tech community, and also from the new tech workers interacting with innovators from the established New York economy.
Such loss of innovation and potential societal value can’t be quantified, but it is real. No matter which side of the argument you stand on, whether Amazon setting up a new HQ in New York would be good for the community or not, the inescapable truth is that a chunk of future innovation in New York just left the city.
