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What Amazon HQ2 tells us about America's great divide

By   Follow Me on Twitter     Message Robert B. Reich     Permalink    (# of views)   1 comment

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From The Guardian

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Tomorrow's technologies are flocking to hubs of innovation on the east and west coasts, while everyone else is left being left behind

From abcnews.go.com: Amazon announces new headquarters in New York City, Virginia {MID-326057}
Amazon announces new headquarters in New York City, Virginia
(Image by abcnews.go.com)
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Amazon has decided that its much-vaunted "second headquarters" will be split between Long Island City in Queens, and Crystal City, across the Potomac from Washington DC.

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Amazon's decision coincides with America's political tumult. Its main headquarters is in Seattle, one of the most liberal cities in the most liberal of states. Its picks -- New York and metropolitan Washington -- are liberal, too.

Amazon could easily have decided to locate its second headquarters in, say, Indianapolis, Indiana. After all, Indianapolis was one of the finalists in Amazon's search for a second headquarters, and the city vigorously courted the firm. Not incidentally, Indianapolis is a Republican city in a bright red Republican state.

Amazon's decision wasn't based on political partisanship, but it does expose the real political and economic divide in America today.

Take a closer look at Amazon's business and you see it's not just a big retail operation selling stuff over the internet. Its real business is to get consumers anything they want, faster and better than anyone else can. To accomplish this, Amazon depends on a continuous flow of great new ideas that reveal what people want, how they consume and the most efficient ways of connecting them to the objects of their desire.

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In other words, like the other leading firms of the world economy, Amazon produces and acts on new ideas rather than standardized products or services. And the best way to generate new ideas is to get talented people to interact with each other continuously and directly -- keying off one another's creativity, testing new concepts, quickly discarding those that don't work, and building cumulative knowledge.

Technology isn't a thing. It's a process of group learning. And that learning goes way beyond the confines of any individual company, like Amazon. It now happens in geographic clusters. In America, those clusters are now mostly along the east and west coasts -- in places like Seattle, New York, metropolitan Washington, Boston and Los Angeles. Indianapolis may be a nice place to live, but it doesn't have nearly as big a cluster of talent as do these others.

The result is widening inequalities of place. Increasingly, bright young people from all over America, typically with college degrees, are streaming into these places, where the sum of their individual capacities for invention is far greater than they'd be separately.

The ideas sparked there are delivering streams of new designs and products to the rest of the world. In return, the money pouring into these places from the rest of the world is delivering high wages, good living conditions (museums, restaurants, cafes, recreation) and unbounded wealth.

Yes, corporate rents and housing costs are soaring, as are the costs of sending kids to school (even many "public" schools are in effect private ones because nobody but the rich can afford to live in the school district). But the incomes and profits generated in these places more than make up for it. Which is largely why Amazon chose New York and metro Washington despite their high costs.

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Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.

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