It is so easy to look at a headline announcing a deal and say "they overpaid." I have done that myself plenty of times. It's a natural emotional reaction.

But what I have learned is that you can't really critique an investment until you know how it plays out.

Some things that look so expensive turn out to have been bargains in hindsight.

And, of course, some overpays are just that. Prices that nobody can make money on.

The current debate raging in NYC about the Amazon deal that the governor and mayor made reminds me of that.

Everyone is saying "they paid billions of taxpayer dollars to the richest company in the world" as an argument that they overpaid for the deal.

But this line in the mayor's op-ed yesterday in the Daily News got my attention:

"New York City alone will net $13.5 billion in tax revenue from the new headquarters, and the state another $14 billion. That's a nine-fold return on our investment."

If these numbers are correct, the billions NYC and NYS spent to incentivize Amazon to come to NYC, will have been a great investment. 

We would take 9x on our money any day at USV.

It is easy and natural to critique an investment on the headline number. But the headline number is only half the story. You really need to see how it pans out to know if it was an overpay.

Published on: Nov 19, 2018