The game theory take: why New York got taken by Amazon

Governor Cuomo came out swinging back against New Yorkers who have criticized the tax breaks associated with the Amazon HQ2 deal – which will bring half of a second headquarters to Long Island City, New York. Where The New Yorker calculated the tax break to equate to each New Yorker Venmoing Jeff Bezos $348, Cuomo compared the deal to getting 90% of the taxes we would have otherwise foregone. So which is it? Well, both. New York has won a battle but is losing a war, a war that it did not need to enter. More specifically, we have set a negative precedent in a repeated game, where states are shooting themselves in the foot with a tit-for-tat strategy, trying to out-discount each other to woo over corporations.

Planet Money framed the dynamic best in a case study of Kansas vs. Missouri. Kansas City sits squarely across both states. And year after year, one corporation or another has pit the two states against one another as they choose which side of the city to operate in. “The states want to keep these companies. So they’re slashing taxes. And they are digging themselves deeper into a hole. That tax revenue is going to pay for stuff like roads and schools and police.” King and Vanek Smith reported education budget cuts in Kansas in the order of magnitude of tax breaks offered to AMC Theaters, Applebees, and the like. This particular state rivalry has resulted in losses for both, consistent with tit for tat game theory. In a tit for tat game, participants always mirror the last actions of their counterpart. So if the state across the way holds their taxes stable, you can too, but if the rival state offers a tax cut, you automatically do as well. Cooperation results in the best outcome for everyone, and confrontation results in net loss over time for each player.

Another game that the Amazon HQ2 competition resembled is the dollar auction. By calling cities to compete for the second headquarters, it appeared to have triggered loss aversion as 238 municipalities invested monetarily and psychologically into the dog and pony show. The aforementioned Kansas City, Missouri’s Mayor wrote 1,000 Amazon product reviews to attract Amazon’s attention. Chicago hired William Shatner to voiceover their promo video. And tax incentive offers abounded. In short, it appears that cities across the nation were drawn into a version of the dollar auction, a type of auction where bidders are willing to pay more than a dollar to win…a dollar. This is because the consequence of not winning the auction is to pay the amount you bid (read: the amount you spent on marketing and political showboating). This potential loss triggers the sunk cost fallacy for many. Sufferers of the sunk cost fallacy continue playing a losing game because they have already invested time and money into the game, despite the lack of evidence that they will make a return on any additional investment.

Cuomo’s argument boils down to two points: every state gives incentives, so New York has to, too; and yet New York is so attractive a place to be that it did not have to offer incentives nearly so big as what others did. Well, there’s an obvious tension between those arguments. New York is indeed enticing enough to attract all the other west-coast tech giants to build big offices: Google, Facebook, and Microsoft. They didn’t get big tax breaks to come here. But we’ve certainly set the stage for them to come with the begging bowls in hand in the future. As a city of 8 million diverse and talented inhabitants, a bidding war is not a game New York has to play.

5 things my dog taught me about management 

My new puppy has brought home a few important things to me in the last month, and not just the balls I ask him to fetch. Learning to train him has illustrated some of the most foundational principals of effective management. Below are the top five training points for building up your working relationships with those you manage, whether human or canine.

1. Build effective communication 

Before you can expect a dog to behave well, you need to be able to identify the cues they are giving you as to their needs. Are you annoyed that they are barking? What might they be trying to communicate to you? Perhaps they are hungry or haven’t gotten enough exercise that day. Noticing what your dog needs and providing that clears away concerns that may prevent them from being receptive to your guidance. When you have met your dog’s needs, you can also communicate your needs by praising the right behaviors (like chewing chew toys) and disincentivizing the wrong behaviors (like chewing shoes).

If you’re experiencing friction with an employee, have you taken cues from them as to their work style? Have you established communication norms? Have you provided clear feedback about what is working for you and what is not? (Pro tip: try creating a Management Readme on Readme.bio for each of your teammates, to more quickly orient yourself to everyone’s work style preferences.)

2. Break it down

Further to the communication point, it often is not enough to just say “be better” at XYZ, as such asks are not specific, and do not delineate a path forward. My dog initially struggled with “leave it”. I started with a simple piece of paper towel in my hand (which he normally loves to chew). He successfully left it. But I made the mistake of jumping right to putting it on the floor and walking away. He chewed it immediately. It was too big a leap for him. I’d skipped across the incremental steps that would have built up his focus. Similarly, explaining a piece of a process to colleagues and then jumping to the end, without breaking out the steps in between, makes it likely that you will lose people in the process. For managees, throwing them in the deep end with minimal prep is much more overwhelming than incrementally increasing responsibility.

I invested time in learning about dog training so that I could figure out how to lead him to the behaviors I wanted to see. Similarly, managers much invest the time to specify what precisely they want to see in terms of actions and outcomes, and work with their team to identify how to get there in the needed time frame.

3. Be consistent

Being consistent and predictable to those you manage helps them to figure out how to work best with you. My dog now start making little noises at 7am every day, as he knows that’s when we take him out to do his morning business, get fed, and play. He doesn’t make noises at night, as he knows we intend to sleep all the way through it. Similarly, managees can meld to your schedule and style if you are consistent. If you always block off 8-9am to review final work, they will plan to provide you content for review at that time. If you praise people for thoughtful project planning or being vocal during meetings, you can expect to see more of that.

4. Have patience 

Dogs take months and even years to be fully trained even in a single behavior. Expect them to make mistakes, and be forgiving yet persistent. Even smart dogs take a lot of positive reinforcement to solidify a habit. Humans need the same! It is perfectly normal to need to repeat yourself over and over, in different settings, so be accepting of this reality.

5. Invest

Dogs grow into behaviors, not out of them. If you continue to invest in building the right behaviors in the first year, you will reap the benefits for a lifetime. Your puppy will grow into an impressive dog who is a loyal companion. It goes without saying that people are also worth the investment! Your managees will prove resilient, and can grow leaps and bounds with the right support.

The Index Card Summary of “The First 90 Days”

For those who just started new jobs this past summer or fall, you may be closing in on the end of your first quarter. As someone who came from a liberal arts background and spent college summers working at non-profits or on my own initiatives, I recall my first corporate job being something altogether different than any setting or challenge I had encountered to date. Standing on the threshold of my first office, I realized that the system I was joining was a whole new kettle of fish. Whether you’re joining a new sector or a new company, the way you prepare and get smart for a new role is distinct to the business context and requires some focused, diligent attention. This summary walks through the key actions for leading your own transition.

Michael Watkins’ The First 90 Days: Proven Strategies for Getting Up to Speed Faster and Smarter gives guidance on how to position yourself for success in a new role. While the target audience is new managers, he identifies challenges common to all new employees and provides a structure for recognizing and addressing the types of challenges that come with differing organizational contexts.

First off, why 90 days? The author posits that the first quarter is a good time to get judged, as people’s impressions and perceptions are starting to solidify. The faster you can get up to speed and move from a “transition” period to having ongoing positive impact, the better. Watkins recommends taking the following steps.

The index-card summary

  1. Out with the old assumptions and habits, in with the new skills

  2. Understand your business context

  3. Manage up: show your boss you can achieve their priorities

  4. Collaborate with your team

  5. Identify influencers

The detail

  1. Out with the old assumptions and habits, in with the new skills

    Leave behind old assumptions and habits tied to your old role. A new company has its own culture, dynamics, and norms. Focus on attuning your mindset and your skillset to your new role. Recognize that you will need to perform at a higher standard than your last role.

    To begin, construct a learning agenda in which you identify competencies to upgrade and skills to gain. Develop a learning schedule in which you summarize your learning needs. Then, figure out the best way to learn, including questions that you need to ask. Create a support network with mentors to support your transition.

  2. Understand your business context

    Identifying the business context you are operating in will aid you in identifying what will be valued in terms of activities and outcomes. Common business situations include Startup, Turnaround, Accelerated Growth, Realignment, and Sustaining Success — or STARS. Each situation will have a different emphasis on learning vs. doing, offense vs. defense, etc. and, thus, will differ in what must be done to secure an “early win”.

  3. Manage up: show your boss you can achieve their priorities

    You will need to establish credibility with your new boss. This means taking on your boss’ objectives and definitions of success as your own. You can then define goals relevant to your role and find opportunities to demonstrate your ability to achieve success by pursuing a few early wins.

    As you identify a path forward, it is your responsibility to keep your boss posted and ensure that expectations are communicated. No surprises is the best policy in working with your boss. You must also adapt to your boss’ style rather than assuming you can change them. Your relationship with your boss is your responsibility. By aligning on your priorities and defining your strategy, you can create a shared vision and establish a clear direction of progress.

  4. Collaborate with your team

    You must align you strategy and vision with your teammates. Assess their strengths and weaknesses, in a non-judgemental fashion. Establish the right structure for speed and effectiveness. Identify personal and team timelines for analysis and action planning. Don’t make decisions before you are ready.

    Develop a common language of communication. This will speed up action and remove misunderstandings.

  5. Identify influencers

    In an ideal scenario, you win the respect of people whom your boss respects. Beyond your immediate teammates, identify and understand the influence of indirect stakeholders, who may impact your goals.

The quick take

I like that this book focuses on what is in your control, and the importance of being proactive as well as receptive to the new environment. It’s worth underscoring that the most important thing you control is your mindset. What I am less convinced by are the tactical tips about quickly identifying all facets of success and converting them into an action plan. Watkins makes it all sound easy. The reality is, it isn’t always easy. In a new work environment, particularly the large ones, I’ve often found my senses on overload, not knowing what’s true vs. what’s marketing, and finding advice from different veterans inconsistent or even at odds. In the end we all have to make our own foundations by choosing how we define success in the context of our careers, beyond just a single job.