In the Competition for Amazon’s New Headquarters, Will Universities Tip the Scale?

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A few years ago, the University of Washington was looking to make a move into a hot realm of computer science — machine learning.

Among its key recruiting targets: Carlos Guestrin, a computer scientist at Carnegie Mellon University, and Emily B. Fox, an assistant professor of statistics at the University of Pennsylvania’s Wharton School, who are married. Washington needed a couple of million dollars to seal the deal. So a longtime computer-science professor, Edward D. Lazowska, emailed Jeff Bezos to ask for help.

“Within an hour, he replied affirmatively,” Mr. Lazowska said of the Amazon founder.

The incident is but a tiny slice of what’s potentially at stake for colleges as Amazon, the world’s largest internet-based retailer, and Mr. Bezos, the world’s richest person, begin weeding through hundreds of applications from cities hoping to host its new corporate headquarters and, in the process, overhaul their futures.

Amazon’s fellow Seattle tech giant, Microsoft, and its founders have bestowed more than $1 billion on the University of Washington. They’ve hired thousands of graduates from UW and nearby institutions. And now, just as Mr. Bezos is poised to wield even greater transformative power, he’s looking to do it somewhere else.

Colleges in whatever city Amazon chooses will probably be “ecstatic to have them move in,” said Mary Lou Moffat, placement-center director at Seattle University’s business school. Amazon is the top outside hirer of her business school’s graduates, as it is at UW.

There are fears about what Amazon could bring to a new home city: excessive home prices and traffic levels, tougher competition for highly skilled workers, a loss of local identity. But in most cities, enthusiasm appears far more prevalent.

Although it allowed applicants just six weeks to prepare a case, Amazon last month announced that it had 238 proposals from cities and regions across North America vying for its proposed $5-billion “second headquarters” and the promise of 50,000 jobs with salaries averaging $100,000. To be eligible, each applicant had to have a population of at least one million while demonstrating a “business-friendly environment” and “the potential to attract and retain strong technical talent.”

In short, it’s a continent-wide battle among cities and their academic and business leaders for the golden hand and the innovative drive of the world’s most successful business titan.

And yet it’s even more than that.

‘Young Bright Folks’

Amazon — which Mr. Bezos began 23 years ago as a modest online book seller — appears to be leading an open-ended drive to harness artificial intelligence, artistic creativity, behavioral insights, marketing savvy, and transportation innovation, and take them in unknowable new directions. And it’s effectively asking higher education — so often bedeviled by disciplinary silos — to prove that it can contribute.

Some experts predict that the winning city will already have top-level university programs in both computer science and management, which would augur well for Boston, Chicago, Philadelphia, and New York. But others say that kind of expertise can be imported or grown, and they expect Amazon to put greater weight on factors such as tax incentives, low cost of living, even airport size. Those priorities would bolster the candidacies of popular picks like Atlanta, Denver, Toronto, and Austin, Tex.

But the scale of what is being contemplated is so huge, said Joseph Parilla, an analyst with the Metropolitan Policy Program at the Brookings Institution, that Amazon will need both existing elite institutions and the capacity to grow them. Not even the biggest U.S. city, New York, has enough of a local talent base to meet Mr. Bezos’s demand, Mr. Parilla said.

That, Mr. Parilla said, may help explain why Amazon has decided to make such a public show of its search process. The phenomenal amount of regional growth that Amazon demands would require cooperation among state and local leaders, academic chiefs, and business executives, Mr. Parilla said. The application process appears designed to help reveal where that type of unity exists.

Seattle showed that cohesion in 2012, when the University of Washington saw the need to bolster its computer-science credentials. The university attracted Mr. Guestrin and Ms. Fox, along with Jeffrey M. Heer from Stanford University, and Ben Taskar (since deceased) from the University of Pennsylvania, through a combination of efforts including a $4-million appropriation from the state Legislature. The star Microsoft scientists Peter Lee and Eric J. Horvitz pitched in by hosting a dinner with Mr. Guestrin and Ms. Fox. Mr. Bezos provided both Mr. Guestrin and Ms. Fox with $1-million endowed professorships, then “personally met with Carlos and Emily on their next recruiting visit, which sealed the deal,” Mr. Lazowska said.

Amazon’s academic interests have not been limited to computer and management expertise, or even to top-tier research universities. The company’s hires last year from the University of Washington included graduates with bachelor’s degrees in English, linguistics, psychology, communications, history, political science, astronomy, biology, and environmental health, along with graduate students in law, public affairs, linguistics, and communications.

Meanwhile Seattle University, just a sixth of UW’s size, began a new master’s program in business analytics in response to the demand from Amazon and other local companies. With 4,000 open job postings in Seattle, Amazon has so many applicants that it uses employee referrals to help manage the crush. But it can’t get enough of the “young bright folks with a college education” it needs, Ms. Moffat said.

That thought encourages Amazon-ogling administrators such as Scott F. Latham, vice provost for work-force development at the University of Massachusetts at Lowell. Local powerhouses such as Harvard University and the Massachusetts Institute of Technology are central to various Boston-area bids for Amazon, Mr. Latham said, but a deciding factor could be the 50 other nearby colleges that can supply the necessary volume of graduates. Some institutions might not like the idea of being seen as an Amazon training grounds, but “the good far outweighs the bad” in that exchange, he said.

University ecosystems less developed than Boston’s also could prove attractive, said Andy Yan, an adjunct professor and director of the City Program at Simon Fraser University, in Vancouver, British Columbia. The key then, Mr. Yan said, would be the willingness of universities to grow in ways that the company would find valuable.

Is Expertise Enough?

Not everyone believes, though, that a region’s higher-education resources will be much more than a fourth- or fifth-level consideration for Amazon. Universities certainly have great value, said Charles M. Elson, a professor of finance and director of the Center for Corporate Governance at the University of Delaware. “But I would suspect that ultimately it’s going to be cost that Amazon makes the decision on,” Mr. Elson said.

Another expert, David H. Feldman, a professor of economics at the College of William & Mary, warned his academic colleagues, “I suspect the zero-sum state competition showering tax relief and other benefits will be important to Amazon’s decision, and more important than the proximity of a big university.”

Even a former university president, Michael A. Olivas, is in that camp. A law professor at the University of Houston and former interim president of its Downtown campus, Mr. Olivas is now spending leave time in Santa Fe, a region he touts as a strong choice because it offers lots of open space, good highway and airport access, and plenty of warehouses. “Those are the things that matter — not whether you’ve got a good university,” he said.

Amazon’s decision might prove to be the most important new data point in a longstanding debate. Do high-performing universities drive a region’s economic growth? Or does the process more commonly work in reverse, with universities changing as local demands evolve?

Among the few recent examples of what Amazon is now contemplating was the 2014 decision by Tesla Motors and its celebrated founder, Elon Musk, on where to place another $5-billion project — an enormous battery factory. Some regions, especially in Arizona and New Mexico, tried to woo Tesla by highlighting the expertise of their research universities. Mr. Musk ignored them and instead chose a remote desert site in Nevada, largely due to the state’s offer of more than $1 billion in tax breaks. The University of Nevada at Reno, half an hour to the west, had no particular expertise in the relevant technologies and took no part in the bid.

The jury is still out on whether that decision was wise, but the factory is now falling badly behind its anticipated production levels. Mr. Musk has been described as greatly worried and even depressed about the situation, and has been camping out on the factory’s roof to devote time to the problems, which include robot-calibration issues, extensive mechanical and electrical flaws, and a need to rewrite all software from scratch.

Because of the production troubles, Tesla’s stock value has dropped more than 20 percent — or about $10 billion — since late June.

Nevada-Reno, though, is enjoying some benefits. About a fifth of the battery factory’s interns are coming from the university, UNR’s engineering school has established an undergraduate minor and a three-course graduate certificate in battery technology, and Tesla sometimes uses UNR facilities for employee meetings. “They’re starting to recognize the university as a good partner,” said Nevada-Reno’s president, Marc A. Johnson.

If history is any guide, those in higher education who expect Mr. Bezos to eschew billion-dollar tax breaks and put a premium on local expertise could be disappointed. The Princeton University graduate got the idea for Amazon in 1994 while working at a New York City hedge fund and watching the rapid growth in internet use. He headed across the country to Washington and founded his venture in a rental house.

The available pool of talent in the Seattle area was an attraction, but only the third-most-important one, according to a subsequent account by Mr. Bezos’s first hire, Shel Kaphan. Washington state’s primary draw, according to Mr. Kaphan and others, was its relatively small size and lack of sales tax at a time when out-of-state tax payments were not required online. The second reason, Mr. Kaphan has said, was Seattle’s proximity to a major book-distribution center.

On the other hand, now that he’s been in Seattle, Mr. Bezos has seen both the cost of recruiting from afar and the tendency in most cases to choose locally. If he’s serious about continuing a transformational business, said Mark M. D’Amico, an associate professor of educational leadership at the University of North Carolina at Charlotte, he’ll have to prioritize local educational resources. “With up to 50,000 jobs to fill,” Mr. D’Amico said, “recruiting talent will not be enough.”

Mr. Bezos’s recruiting partner at the University of Washington, Mr. Lazowska, agrees. “If I were Amazon,” he said, “why would I want to go to a place that’s a fixer-upper, as opposed to a place that’s already producing the sorts of people that I want to employ?”

Attractive to Amazon?
Major U.S. urban areas, ranked by universities with top-15 schools of business and of computer science

Source: The Economist ranking of U.S. business schools and Niche ranking of computer science schools, combined for each urban area based on top 15 ratings in each category (weighted on value of 1 point for 15th place, 3 points for 14th place, etc.) and limited to urban areas with populations of at least 1 million.

Clarification (11/6/2017, 1:34 p.m.): An earlier version of this article may have given the impression that Emily B. Fox was hired by the University of Washington as a trailing spouse. In fact, as reported within the article, Ms. Fox received a $1-million endowed professorship equal to that of her husband, Carlos Guestrin. The article has been updated to more clearly portray the recruitment of Ms. Fox and Mr. Guestrin.