What Amazon’s HQ2 really means for Virginia

With the recent announcement that Amazon's HQ2 will reside partly in northern Virginia, we gather together an emergency EXTRA episode with some of the most infl...

It’s official: Amazon’s HQ2 is going to be coming to Northern Virginia, posing a huge economic opportunity for the D.C. region. To learn more about the benefits and costs coming with the new headquarters, we held a roundtable meeting with three experts on both the area and Amazon: Ángel Cabrera, president of George Mason University; Tien Wong, CEO of Opus8 and veritable household name among the region’s entrepreneurial community; and Jason Miller, CEO of the Greater Washington Partnership, the region’s leading business group.

ABERMAN: So, how jazzed up are we that Amazon’s coming to this community?

CABRERA: Immensely. This is a huge deal for the community, for the region, and is definitely a huge deal for the University. I think it’s hard to exaggerate how important this is, beyond the immediate economic development impact. I think that’s what sort of drove most of the media attention, 25,000 jobs, that is meaningful. The spillover effect that this is going to have into the innovation fabric of this region is even more exciting.

ABERMAN: Jason, how about you? This literally has been a big chunk of your life for just about as long as I’ve been working with you now.

MILLER: There’s no doubt, this is a game changer for the region, and I think Ángel said it right. The coverage has focused on the 25,000 Amazon employees that are going to be located close to one another in Northern Virginia, but this is about how we really change the trajectory of our region overall. If you look at where we are, and where we’ve been recently, we’re a slow-growth region.

We have phenomenal things happening here, but we are a slow-growth region, and when you compare us to other metro areas around the country that have been growing between 2 and 2.5 percent, we’ve been closer to one percent. So, we needed a bit of a kickstart. This accelerates a lot of what we know people around the region have been trying to drive, and it gives us a big opportunity to really pull forward some of the challenges and opportunities for the region.

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ABERMAN: I’m going to come back to that slow-growth aspect in a moment, but before I do that: Tien, you and I have been part of this entrepreneurial community for quite a while. We’ve seen the ups and downs. Why are you so excited about this?

WONG: I’m thrilled. You have one of the top four or five largest market cap companies coming into DC: it’s validation of our community, our ecosystem, saying to the world that we are a true player. It’s going to have secondary and tertiary effects that haven’t even really been figured out yet, but I think that you’re going to see a lot of secondary and tertiary effects that are gonna benefit the the entire region. So, we’re absolutely thrilled about it.

ABERMAN: Jason, I want to come back to you, because you said something that I’m not sure everybody really understands or appreciates. I know from my own work with the Greater Washington Partnership and elsewhere, the economic growth here lags behind every significant Metropolitan region around the country. How is this deal going to help us a close that gap?

MILLER: I mean, for one, the proximity to the federal government here is a huge asset, a big reason that we have the talent pool, and the capabilities, and the education level, and the research that we have. But, we need to do a lot more to diversify our economy. Our two big growth opportunities, from an industry standpoint, if you look at our existing capabilities and our existing assets, are biohealth and digital tech. And for digital tech, we needed a major anchor, one of the leading tech companies in the world, increasing their presence here.

There’s a lot of activity that’s happening, but it’s very nascent still, and we need to take advantage of it. If you look at the growth of this region over the last thirty or forty years, we’ve had moments of big tech firms taking root and growing. You see the offshoots around the community, but it’s never generated the level of activity, and the level of growth, consistent with the quality of talent and capabilities in the region. I think this gives us the jumping off point that we need.

ABERMAN: Now I don’t want, for a moment, to let our collective enthusiasm obscure that many people in town are worried about some of possible bad effects: talent may get more expensive, traffic could stall, and various things. Ángel, I’ll ask you: because Mason’s going to make a big investment in Arlington, you’re going to grow like crazy. What’s your perspective? How do we answer those who are worried about the bad aspects of this transaction?

CABRERA: Well, I think that some of the concerns are real, and we have to be aware of them, and we have to take action. I think it’s absolutely true that we know what those are: transportation is going to be an issue. Housing cost, and cost of living, is going to be an issue, and they’re going to be several aspect that we need to recognize. Long term, this is a game changer, and I agree with Jason. What is different, I think, about Amazon’s decision, compared to prior companies that have moved their headquarters, and have made significant investments: well, the size. Twenty-five thousand jobs, I don’t know if people realize, this is pretty darn large.

I mean, this may position Amazon, really, as a top employer in the region, perhaps only behind the federal government. But the other aspect is the signaling effect. I mean, this is a household name. This is one of the most attractive brands. When I talked to our George Mason University computer science students, and students in other majors, that’s where they want to want to go. They want to work for Google, they want to work for Apple, they want to work for Amazon. So, the signalling effect that this region is in play, that the greater Washington area is one of those places you want to be part of if you want to be a player in technology, I think that’s going to be the source of those secondary and tertiary effects that Tien was mentioning.

ABERMAN: I think that’s right. Tien, you’ve been building businesses here for thirty years. Why is this deal a big deal for you, as an entrepreneur? How is it going help you grow your business?

WONG: Well, I think there’s a lot of things that’s going to help. I think it’s gonna drive capital to the region. It’s going to drive attention, like we mentioned earlier. There are some concerns that we have, which are, obviously, in the labor market. You know, we’ve been in a constant war for talent for many, many years, and I think it’s just going to get a little more competitive as we go forward. So, we have to look for other alternatives, such as hiring some remote workforce from other parts of, say, rural Virginia, rural Maryland, which we’ve been doing. West Virginia, as well.

Also, providing the workforce with flexible options such as tele-work, for example. But I think that the main challenge for the region will certainly be, especially for the big universities, like Dr. Cabrera’s institution, and University of Maryland, even, and several of the other awesome Universities that we have in the region is: how are they going to keep up with the pace of demand that these employers, primarily Amazon, but other employers like ours are going to have, because really, it’s been a problem for quite a while.

CABRERA: I think Tien is absolutely right, the decision by Amazon was all about talent. The proposal from Virginia, that ultimately brought the decision here, was all about talent. The challenge and the opportunity is all about talent. It is clear, if you see the quote from the head of the Virginia Economic Development Partnership, Stephen Moret, yesterday said, this was all about talent, and the centerpiece of our proposal was about that.

We have been, just to put it in perspective, George Mason University has been growing at a pace of about a thousand additional students every year. In the last decade, we’ve already driven half of the entire growth in enrollments in the whole Commonwealth of Virginia. So, we’re used to growing. I mean, we are one of the youngest universities in Virginia, and we’re the largest, we’re the fastest growing. So, we’re used to growing, and we’ve been growing since we were founded. And yet, this sort of raises the stakes significantly. That’s why we’ve announced that we’re going to have a pretty large expansion of our Arlington campus, which is located very close to the new site of Amazon.

But also, we announced that we’re creating Virginia’s first dedicated school of computing. Georgia Tech had one for several years, MIT just announced theirs a couple of months ago, and we think it’s absolutely essential that we organize a multi-disciplinary, focused school of computing to serve this. So, we’re ready, we’re primed, we’re excited. We don’t underestimate the size of of the challenge, but we’re going to do what we can, and I have no doubt that the other Universities in the region will do their share as well.

ABERMAN: Jason, I know from the work that the Partnership has done already on talent, even if Amazon didn’t come, we’d still have an enormous need for talent development.

MILLER: Yeah! I mean, Dr. Cabrera’s University, George Mason, and many others together, we actually produce more tech qualified degree-holders than any other region in the country. We’re the third-largest talent pool today behind the Bay area and the New York City area, but we’re the number one producer at the two-year, the four-year, and the postgrad. Yet, because of the insatiable demand of large companies and small companies, we’re still not keeping pace.

I think the investments that the Commonwealth is making are fantastic, to significantly increase the tech talent pipeline, but we also have to look outside of the four-year system to generate some of the talent that we need, leverage, you know, high schools and community colleges in smart and thoughtful ways to harness a broader pool. The second thing I would say is, the reality today is, we’re a huge producer. We have a large gap, but we’re actually a net exporter of that talent. So, going from net exporter to net magnet for talent is another mechanism by which we’re going to bring the quality people here to the region that our businesses need.

CABRERA: I fully agree with Jason, both in the need to attract from outside, but also to look at what not just the four year research Universities, like George Mason, can do. Earlier this month, we had a great presentation about our new partnership with the Northern Virginia Community College. People may not know this, but we have, in our region, one of the top three or four largest community colleges in the country. And the talent solution is absolutely going to involve a much better partnership and alliance between the community colleges and Mason, which is basically the purpose of our advanced partnership.

Just this past week, you may have read that our community college, Northern Virginia Community College, has a pioneering relationship with Amazon Web Services already. They have one of the very first web computing certifications with them. So, we have the size, we have the alliance between a research University and a community college, and we have the experience of working precisely in this field. So, absolutely, keep the attention also on the community college side.

ABERMAN: The other thing that I’ve seen, and I think this is also borne out in the Amazon deal, is that the 21st-century worker, particularly as artificial intelligence, machine learning, and similar technologies become more ubiquitous, we need to have liberals arts minds match with engineering brains, and the advanced program that you mentioned, I think, is a great example of that. Tien, many of our business acquaintances that we have in common are saying to me that they’re really worried that the biggest problem they’re going to have now is being able to afford to hire people, because tech talent is going to get so expensive.

You talked about telecommuting and broadening it before. What other answers can you give our entrepreneurial friends who are concerned about whether or not they’re going to be able to compete to hire the people that they need now?

WONG: Well, I mean, I think we have to get creative. And we also have to hope that Amazon doesn’t staff 25,000 people tomorrow. They won’t, so you do have some time to sort of develop your plan B, which would be to get creative about recruiting. And I think, we talked about importing jobs, right, Jason, and becoming a net importer of jobs. I think that that’s where small business employers, small tech companies like ours, we need to get creative, we need to be targeted, and create working environments and challenges to the job that are attractive to our target market.

So, I know Amazon is going to have, generally speaking, specific needs that they want to fill. So, hopefully, not all jobs are the same in terms of skill level, or requirements. So, the ones that are competing directly with Amazon, those employers are going have to figure out how to differentiate themselves from Amazon.

ABERMAN: I think that’s right.

MILLER: Can I just add one thing to this? I think increased cost of talent means increased household income, right? And we’re slow-growth top line, and we’re slow income growth as well, as a region. So, you know, upward pressure on wages is about us getting the balance right. I think that the second thing here is, we’re talking about what this means from an innovation ecosystem standpoint, what this means from a talent standpoint, what it means from a growth standpoint. I think it’s important, within all this, to recognize that we are not going to become, nor should we want to become, a me-too innovation hub. We are meaningfully different.

We have people who come to the region because of the mission-orientation of the region, and frankly, a lot of the technology trends are moving in that direction. And us harnessing what’s unique, and maintaining that culture and community here, is going to be absolutely critical as we move from a slower-growth place to a faster-growth, more innovative, higher-charged startup ecosystem.

ABERMAN: It’s a big job. How are we going to differentiate ourselves culturally and educationally to make sure that we’re distinctive and people want to come here?

CABRERA: The great opportunity that this region has is to create its own flavor and brand of innovation. I’ve always thought it would be a mistake for regions to have this obsession of “How do we become Silicon Valley, or how do I replicate what has happened in Austin or Cambridge or somewhere else? We have an amazing mix of assets that are only present here that are now going be enriched by the presence of a company like Amazon and everything that will go around that. We have an incredible concentration of policy, knowledge and think tanks of international, multilateral organizations, of course of all the federal government agencies and regulatory bodies. Then we have the whole tradition of government contracting.

We know how to deal with complex, heavily-regulated industries. And I think it’s not clear how, but going to be in mix of all of that that you will see a new brand of Washington, a greater Washington innovation brand emerge. That’s what’s going to be super exciting from our standpoint. We were already trying to figure out how this new school of computing in the Institute of digital innovation that we’re creating how it’s going to link with our Shar School of Policy and Government. How is it going to link with our Scalia Law School? How is it going link with all the other departments to fully leverage the traditional areas that made us strong as University same things going happen at the University.

ABERMAN: Jason, amongst your members and boards, you have many people who are I think are really spend a lot of time thinking about the culture of this region. In fact, the many cases their cultural leaders of this region. What’s you’re thinking about how a group like Greater Washington Partnership contributes and making sure our region’s distinctive and understands itself well?

MILLER: I think the impacts here beyond Washington. We always refer to the capital region is Baltimore -Washington -Richmond is one interconnected set of metropolitan areas. And that’s true, when you think about the talent Washington will and you think about where companies are locating different portions of their business throughout the region. What I do think — and this goes back to a point that was made earlier — some other places that have faced fast growth have not gotten ahead of the challenges like transportation and housing. And if we can’t do that, it does undermine the distinctiveness of our region. But we know this isn’t going to happen overnight. We’ve been thinking about these challenges for a long time.

And we know it’s coming if we don’t do anything about it. So we have a great moment right now to say, “Look We’re we’re about to embark on an adventure of faster economic growth greater opportunity and changing our trajectory as a region. We need to make the investments in the systems that make our region work. The big investments in education, building off of what Virginia announced and big investments in our transportation system and the policies investments needed from a housing standpoint, so we can maintain and retain the people that have already come here, who live here, who grew up here because that is part of what makes us unique.

ABERMAN: So the business community in this town is not going to just stand back and say, “Oh well free market governs all” — the business community actually plans on working with the education community, the entrepreneur community, you try to come up with collective solutions to a lot of these problems

Miller: Absolutely. I think if you look at the timeline of any elected leader, it is by definition shorter than the problems that were talking about. So you need leaders across a community — particularly in the business community — saying “Let’s look out 10, 15 20 years. These are things we need” and be consistent about the agenda.

ABERMAN: Tien, what do you think? You came down — you were up in New York. Free market. Mayhem. Do you think that this town has the character that caused you to want to move down here, and will maintain it even if it starts to grow faster?.

WONG: I think the two big “ifs” are: if our collective leadership in the private and public sectors and our education sector can get our collective act together and improve those fundamental problems that we have here, then I think that you’re going to see other companies —remember three of the 20 finalists were DC region: Montgomery County, Northern Virginia and DC. So you bet that every other company in America is looking in this area because of that.

And there’s lots of a great sites in Loudon County, Montgomery Country, DC, Baltimore. So you’re going to see that. But that’s a big “if” and the other “if” is if we can make the area cool so that kids —recent graduates, recent MBAs —will want to move to DC. We want to be on a par with New York, Boston, San Fran and L.A., basically. And if we can do that, we will definitely be anet importer of jobs. I think we got yet we got get our act together with infrastructure transfer nation housing you. It’s not easy.

ABERMAN: I love the way you describe us as “cool.”

WONG: Well, my kid lives and works in Boston. If it were cool in DC, he’d be down here.

ABERMAN: We have a relatively short time left and I want ask you each to do a bit of future-casting. What does success look like in five or ten years? Jason, let’s start with you. If we’re looking back five -ten years from now, what are we celebrating?

MILLER: I think we’re celebrating that we have — at the same time — moved from a
slow-growth to a fast-growth region while we’ve made the investments so that it’s beneficial to everyone. We have the opportunity to actually be a model for what an inclusive tech hub looks like. And that is both from a making sure that the entire community benefits and who are the people that get tech jobs? Making sure that there’s actually a diverse stream of people into that into that industry, in addition to making sure the entire community benefits from faster growth.

ABERMAN: Angel, How about you?

CABRERA: I think it’s a combination of the success of this business decision obviously, the impact and this faster impact in the innovation fabric. But also our response to maintain and even increase a good quality of life. We’re so fortunate to have some of the best public schools in this region. Can we maintain that? We have an incredible arts scene. It is the arts, at the end of the day, that builds a community. That’s why we spend so much effort even at George Mason University being sort of conveners for the arts. Can we maintain, can we turn that really into thriving aspects of this community? So it’s going to be a combination of both: what we do on the business end, what we do on the quality-of-life side.

ABERMAN: Tien, what do you think success looks like?

WONG: I think success looks like an influx of capital into the region over the next 5-10 years. Not just the large domestic funds, but you’re going to see international funds, I believe, start looking at DC as a viable alternative; funds from Asia and Europe and the Middle East not just looking at assets in Northern California, for example. I think we’ve been a net decrease in terms of committed funds in Washington and I think that this could change the whole thing. So if we’re able to get our act together, etc, then hopefully DC becomes a capital capital!

ABERMAN: I love the pun. We will end with a pun. We’re primed and pumped. Let’s get after Amazon HQ2. See you next time.

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