Amazon Takes Over: How a Flood of People Could Remake Seattle

5/9/12Follow @curtwoodward

In Seattle, the future is pretty easy to find. Just head to Amazon.com’s neighborhood.

Just a few years ago, this corner of the city was dominated by warehouses and cheap rentals. It was a mostly forgotten area, infamous for the rush-hour traffic that piled up as drivers fled to the freeway.

Today, the place is alive. The blocks are packed with fresh new offices, condos, and bustling businesses. Food and drink are plentiful. People are everywhere.

There’s more on the way. In a dramatic expansion that could take nearly a decade, Amazon is buying three city blocks just a few minutes away from its current headquarters, where it wants to build three office towers of about 1 million square feet.

A few years from now, if those plans are realized, you’ll be able to stand on the edge of Amazon’s current campus in South Lake Union and look toward downtown as construction cranes remake the skyline. Block by block, Amazon is eating Seattle.

But the shiny new buildings aren’t really the story. If you want to see the true revolution that’s coming, look at the people filling up those offices: thousands of smart, skilled information workers, imported by one of the most ambitious forces of the digital age.

These people have a chance to remake the face of Seattle. Ten years from now, when you mention Seattle to an outsider, the corporate nameplate that springs to mind might not be Starbucks or Boeing or even Microsoft. If Amazon can sustain its growth, there’s a good chance this could become Amazon’s town.

“I don’t think you’ll recognize the two Seattles—one before Amazon was here, and one after,” local entrepreneur Bryan Trussel says. “They couldn’t help but affect the culture of the city.”

The 10th of Amazon.com's new headquarters buildings in Seattle.

THE NUMBERS

The funny thing about the most vital company in Seattle today is that nobody seems to know how many people actually work there. Amazon itself doesn’t say how many of its workers are at headquarters, part of an infamously secretive culture that refuses to give any more glimpses at the company’s workings than legally necessary. (The company declined to comment for this story before I even posed a real question.)

When I asked enterpriseSeattle, a local economic development group, to research Seattle employers with more than 4,000 people last year, Amazon didn’t even show up on the list—probably because it’s grown so fast that data providers haven’t been able to keep up.

But it’s possible to guess, and the most commonly used formula is estimating how many people could fit into Amazon’s current offices. Commercial real estate brokers say Amazon already occupies about 1.95 million square feet of space in Seattle. An industry rule of thumb holds that corporate offices can fit one worker for every 200 square feet of space (although tech companies are known to pack people in tighter than average).

That means you could probably peg Amazon’s Seattle workforce at around 10,000 people—a figure that would already make it the largest private employer in town, ahead of the 8,000 at Boeing’s military airplanes division, according to enterpriseSeattle’s research. “I think they’re the largest private employer in downtown Seattle that I can remember in my business career,” says local developer Matt Griffin.

Amazon is known to have leases on another 600,000 square feet of space, including the fifth and final phase of its 10-building headquarters campus, which is still under construction. But that’s just the beginning. [Updated to correct headquarters campus is five phases, 10 buildings.]

It’s Amazon’s striking plan for three new office towers on the edge of downtown Seattle that will truly supercharge its presence here. Once full, they will more than double Amazon’s current estimated workforce. At a recent Seattle City Council meeting, Amazon global real estate director John Schoettler gave the most detailed disclosure yet about how many workers Amazon is bringing into the city.

“Each building could hold approximately 4,000 employees. So we could say 12,000,” he said. “That’s a lot of jobs.”

That’s on top of the massive footprint that Amazon already has around South Lake Union, most of it through Microsoft co-founder Paul Allen’s Vulcan Real Estate.

“We’ve exceeded our growth projections. When we initially signed the leases with Vulcan to develop the South Lake Union project, it was supposed to last us through 2015-2016,” Schoettler said. “That was for 1.7 million square feet. We’ve added an additional million square feet to that. And now this would be an additional 3.2 million.”

That means Amazon could be on a path to have more than 20,000 workers in Seattle—a fairly staggering number of people working for one company in this city of about 600,000 residents. Should Amazon reach that size, it would be an institution around the same size as the University of Washington, which currently employs about 25,000 people in Seattle.

And just as important as the numbers are the kinds of people that Amazon is attracting: innovative, technically skilled, business-savvy knowledge workers from around the world. They’re the kind of people who will be prized in an economy increasingly driven by technological disruption.

Dan Bertolet, a Seattle-based urban planner who also analyzes development and density at Citytank, wrote recently that Amazon’s expansion is an example of how “Seattle’s exceptional combination of intellectual, economic and natural capital is propelling the city into a dynamic future.”

“And it’s also an investment in the right place—a walkable, transit-rich urban center, as opposed to the car-dependent burbs where Microsoft set up shop in their early years,” Bertolet said. “Furthermore, all those new jobs will draw more people to Seattle, and most of those people will want nearby places to live, fueling a virtuous cycle of densification.”

“It’s also bringing in a lot more intellectual capital to the Northwest,” says Griffin, the Seattle developer. “It’s the intellectual capital and horsepower that helps us to generate new jobs and new ideas.”

CITY VS. SUBURBS

Microsoft, which employs some 40,000 people throughout the broader region, sits just a few miles away from Seattle in suburban Redmond. The distance, however, is deceptively significant—the two cities are separated by a large lake—and has meant that Microsoft’s talent, wealth, and alumni are spread out and often disconnected from Seattle itself.

Trussel, the CEO of smartphone-app startup Glympse, has seen this dynamic up close.

He started at Microsoft in 1991, when the software company was still housed in a few one- and two-story buildings that the company leased “over in the woods in Redmond.”

Now, Microsoft boasts a sprawling complex tucked between the housing developments and shopping malls. Its presence has remade the suburbs on the eastern side of Lake Washington into an area of relative prosperity. Expedia, the online travel giant that spun out of Microsoft, has its corporate headquarters in nearby Bellevue, and one of the region’s top venture firms, Ignition Partners, is nearby. To this day, startups founded by former Microsofties still spring up around the Eastside.

That’s where Glympse started. The company makes a location-sharing app for smartphones that lets users show other people where they are at any given moment—sort of a self-tracking device that, for instance, lets your kids know how far away you are if you’re late to pick them up.

The company began with five employees, all working in a humble office in Redmond. They were literally minutes from their homes, and had no thoughts of relocating.

Then, Trussel says, he took on some venture cash to help Glympse grow. Board member Michelle Goldberg, a VC from Ignition Partners, said she presumed the group would be moving to Seattle for its next phase of growth.

“And I said, ‘No. Why would I move to Seattle? We’re all in Redmond, and we’re all close, and we don’t waste any time driving,’” Trussel recalls with a laugh. “And she gets a really serious look and says, ‘Bryan, if you’re going to build a consumer company in software, you need to be in Seattle.’”

The Glympse team started looking around for new digs in Seattle, scoping out all the standard neighborhoods where startups might grab some office space: historic Pioneer Square, with its old brick buildings; funky Fremont, where companies like Google and Tableau Software occupy big offices along a ship canal. In the end, they settled on a former architect’s office in South Lake Union, just east of the Amazon campus, next to a parking lot where several busy food trucks congregate at lunchtime.

Trussel now says that not being in Seattle earlier was among his top five mistakes as a CEO. “From day one, we were like, ‘This is fantastic.’ Everything about it—the vibe, the area,” he says. “I think I really underestimated the impact of your office space, both the quality of it and the location.”

And it’s not just the packed restaurants, cool bars, and gleaming new buildings that has Trussel excited about his new neighborhood. Those Amazon engineers at the food trucks outside? If they pull out their smartphones while waiting in line, they’ll see a wireless network pop up under the name “Glympse is Hiring.”

“There was a physical and psychological barrier between Microsoft and Seattle,” Trussel says. “Amazon is in the heart of it.”

The lunch crowd at food trucks outside Glympse headquarters near Amazon's campus.

DENSITY RULES

Influential urban planning theorists like Richard Florida have advanced an idea in recent years that there is something special about a concentration of creative, talented people in a dense urban environment.

Developers and city officials around the U.S. yearn to create neighborhoods like South Lake Union, with its collection of human capital that leads to serendipitous discovery, chance meetings, and random inspiration that can breed unexpected, positive results for an economy and a society. These are the kinds of interactions that happen for techies in San Francisco’s SoMa neighborhood, and for biotech pros near MIT in Cambridge, MA’s Kendall Square.

“Cities bring together diverse groups of people and companies in ways that increase productivity,” Florida writes, “and create the networks, clusters, and chance interactions that lead to the discovery of new innovations and the creations of new entrepreneurial businesses.”

Chris DeVore sees the roots of such a scene taking shape around Amazon’s headquarters. DeVore is a general parter at Founder’s Co-op, a prominent early stage investment firm that recently raised an $8 million second fund and has connections to just about every notable tech startup investor and entrepreneur in town.

DeVore and his business partner, Andy Sack, moved their headquarters to South Lake Union in mid-2010, after Sack took on the director’s job for Seattle’s branch of TechStars, a top-tier accelerator program that nurtures and invests in tech startups. Their offices, tucked alongside the Amazon campus, are now a hive of activity for Seattle’s burgeoning startup scene—along with the annual classes of TechStars startups, the building houses several of the fund’s portfolio companies, including website gamification company BigDoor and mobile gaming startup Zipline Games. A common area in the basement has been transformed into an all-purpose free meeting space for tech-related events, under the banner of StartupCity. And just steps away, in virtually any direction, are coffee shops, taverns, and restaurants packed with Amazon workers, investors, and entrepreneurs.

“The commitment [by Amazon] to stay in downtown feeds a lot of what I believe to be critical for the future of Seattle as a tech innovation hub, which is density. It’s the density of lots of different layers in the ecosystem—the canopy, the middle, and the ground level of the rain forest—where everybody’s in the soup together and they get together for coffee, and they have lunch, and they share ideas,” DeVore says. “I believe that, in the long run, that will be the role that Amazon plays.”

But there’s another element to Amazon’s presence that makes it something more than an anchor tenant. The company prizes driven engineers, developers, and product managers who build innovative products with an almost obsessive focus on the customer. Teams are purposely kept small—legend has it that if your team can’t be fed with two pizzas, it’s too big for Amazon.

Amazon also prizes frugality and expects after-hours work—sometimes to extreme degrees, according to former employees. And teams are said to be given autonomy over their projects, with less regard for internal politics than at other big companies.

In other words, if they ever get tired of a big company, Amazonians are good candidates for a startup. And that’s strikingly different, DeVore says, than the profile you might typically see at the region’s other tech heavyweight.

“If I had to pick a team of guys to invest in, I would always pick a team from Amazon over a team from Microsoft—even if they were equally competent from a skills standpoint,” he says. “The behaviors and the training and the cultural conditioning that you get at Amazon are much more about independent, autonomous, performance-oriented … you live or die by your metrics.

“At Microsoft, it’s much more about how effectively have you moved your agenda into the broader agenda of the organization … it’s less about excellence in platoon performance and more about being a good team player and political operator. And both of those are admirable and valuable skills, I’m not judging one or the other. But for my world, which is about autonomous, high-performing teams, Amazon manufactures more of that than Microsoft does.”

And these days, those teams cover a lot more territory than the relatively simple core of online retail. Amazon Web Services, the company’s cloud-computing provider, now powers a significant slice of the Web and is estimated to generate around $1 billion in annual revenue. Amazon’s Kindle Fire, even in its somewhat clunky first version, has become the unquestioned leader among tablets running on Google’s Android operating system. Amazon’s digital content initiatives are rapidly expanding to bring that new hardware to life, and the company is even making bigger moves into content creation.

In short, Amazon is picking lots of fights—and that means a more diverse array of technical and business skills among the entrepreneurs who will eventually decide they want to leave and try their own thing.

“So we’re going to be able to partake in the human exhaust of lots of different battles that they’re fighting. And it won’t hurt them, in the sense that there’s natural churn in an organization. It’s not like we’re stealing people out of Amazon,” DeVore says. “It’s people who’ve chosen to spit themselves out. And we just want to be there to catch them.”

FITTING IN

The quick rise of Amazon won’t come without its headaches. Seattle doesn’t have a very good public transit system—it’s mostly based on buses—and car traffic around the company headquarters is already packed enough that Seattle police have to wave cars through the quaint little four-way stops at quitting time. A few blocks away, a major construction project snarls the rush-hour commute toward the freeway.

Housing in the city also could become more expensive if many thousands more people flood into the area, particularly if they make decent salaries. But the culture of Amazon also will have to be grafted onto the city, and that may not be an easy feat.

Seattle also has a well-earned reputation for being very politically liberal—hybrid cars, natural food stores, backyard chickens, and tax increases are well received here. Clever businessmen, vast wealth, and fancy dress are often frowned upon. Seattle likes its institutions to be world-class, but it also wants them to remain humble and give back to the community.

Amazon founder and CEO Jeff Bezos, on the other hand, is said to be quite libertarian in his politics—and it shows in his business strategy. Where Amazon sees the beauty of efficient markets liberating consumers from hefty price markups, some see a rapacious margin-chiseler bent on destroying the local bookstore.

Where Amazon sees a clever tax policy that keeps it from competing head-to-head with the big box guys, many see a cynical series of subsidiaries and technicalities that mostly serve to deprive cash-strapped states of sales taxes that brick-and-mortar retailers have to collect.

And, as any reporter who has covered the company can attest, Amazon is not that interested in engaging with the public discussion about itself—the Amazon public-relations strategy amounts to “we’ll let you know.”

This culture clash was crystallized in a recent multi-part report by The Seattle Times. The newspaper, saying it was taking readers “Behind the Smile” of Amazon’s cheerful logo, detailed complaints from local charities that Amazon has been largely absent from the giving circuit. Subsequent reports took on Amazon’s sales-tax avoidance, its hard-nosed approach with the publishing industry, and reports of poor working conditions in some of its warehouses.

The reaction to those stories offered a glimpse at the mixed feelings Seattle has about Amazon’s growth. Commenters lit up the Times’ Web pages with criticism, wondering why the paper had set out to kneecap a company that was doing so much hiring and bringing such talent and wealth to the city. The newspaper’s top editor was forced to write a column explaining why the Times had gone after Amazon, and asserting that the staff had actually gotten several quieter messages of encouragement.

Some of the criticism Amazon gets can simply be chalked up to normal growing pains that come with success. But there is still a risk that the company’s insular internal culture will serve as a brake on the enormous potential that its people have to affect the city. It’s not enough to just cram a bunch of people together—they have to be open to the random interactions and encounters that can spark new ideas. Right now, Amazon rarely opens its doors to the public, and usually only does so when it’s got a new service to sell.

“The fact that they’ve chosen to [expand] in the city’s a little bit surprising, just because of the fact that Bezos is so paranoid. The culture of secrecy—it borders obsessive paranoia. It’s a need-to-know culture. And so the question is, will the promise of that many really smart technologists in the middle of a city be realized?” DeVore says.

In an industry that particularly prides itself on sharing knowledge and showing your work, it’s a bit of an anomaly. And in an era when the best Web technologies are about connecting people with each other, as DeVore has written, Amazon continues to be about connecting customers with merchandise.

“Our version of a perfect customer experience is one in which our customer doesn’t want to talk to us,” Bezos recently told Wired magazine. “Every time a customer contacts us, we see it as a defect. I’ve been saying for many, many years, people should talk to their friends, not their merchants.”

SEATTLE’S GROWTH

The frothiness of the tech sector in the greater San Francisco area has given Seattle a new bit of shine in recent years. The cheaper cost of living translates into lower salaries for top engineering talent, which has become so hard to find in Silicon Valley that big companies have been snapping up startups just to hire their developers.

In this climate, Seattle has become the favorite second engineering office for the Valley’s biggest and hottest companies, including Google, Facebook, Splunk, and Zynga. They compete for smart graduates from the University of Washington, but in a time of declining state budgets, there’s only so many of those people available. The real prize is usually raiding the cupboards of Microsoft and Amazon.

Even startups are getting in on the action. “I love the fact that Amazon is sitting here expanding,” says Adrian Aoun, CEO of Seattle-based semantic search startup Wavii. “I’m like, `Two for you, one for me. You pay the relocation fees, I’ll bring them in a few weeks later.’”

Even with increased competition for talent, Amazon is growing at a remarkable rate. Last year, the company’s employment base grew 67 percent to 56,200 employees worldwide. Just 90 days later, Amazon’s head count had jumped again, to 65,600—a hiring rate of more than 100 people per day.

Head to South Lake Union any weekday morning, and you can see it in the flesh. On sidewalks where hardly anybody walked five years ago, Amazon employees are everywhere. They come from every direction—pouring out of buses, crowding the street corners, and streaming down the sidewalks, wearing the telltale light-blue ID badges. They tend to move quickly, and don’t spend a lot of time chit-chatting. Amid the most significant corporate expansion this city has seen in years, there’s work to be done.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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