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Amazon Goes To Virginia: How Long-Term Thinking Won The HQ2 Prize

This article is more than 4 years old.

In Albany, even the fleeting taste of victory was a little bitter. When, last November, Amazon announced that it would split its new headquarters (HQ2) between Long Island City in New York and Crystal City in Virginia, it was reported that New York was offering tax credits equal to $48,000 per new job while Virginia had agreed to workforce cash grants of $22,000 per job. No one likes to pay more than double what the other guy pays for the same prize.

Given the subsequent grassroots revolt in New York and Amazon’s decision to seek friendlier environs, the point might seem academic. Yet it does offer a key to some larger lessons that, in retrospect, Virginia’s winning strategy underscores.

Lesson Number One is that tax credits and other dollar-specific incentives are often just the table stakes; that, for companies like Amazon, larger cultural dynamics are more important. If that’s true, Virginia was well-positioned as it’s always been a low-incentive state, as Stephen Moret, director of the Virginia Economic Development Partnership, told the press. “We wanted to win this in a Virginia way,” he said.

At the same time, Virginia’s win is bigger than Virginia. From the get-go, a potent message was being sent to the Amazon decision-makers: that the three separate contestants from the region – Washington, DC and Montgomery County, MD along with Virginia – were not playing a zero-sum game; that, by choosing one, Amazon would benefit from the resources, human and otherwise, available from all three.

In turn, all three contestants would benefit from the immense economic bounty that Amazon’s arrival anywhere in the region would provide. (The actual HQ2 winner, now dubbed “National Landing,” is a slice of Virginia that includes parts of the Crystal City and Pentagon City neighborhoods in Arlington County along with Potomac Yard in Alexandria.)

“In the past, the region competed fiercely over available opportunities, so much so that, often, the region would all lose out in the end,” says Jason Miller, CEO of the Greater Washington Partnership, a civic alliance of 27 leading employers and entrepreneurs representing businesses from Baltimore to Richmond. “This time, a greater collective political will prevailed.”

Such apparent political comity had to be music to Amazon’s ears as it offered a reassuring foretaste of what doing business here would be like.

Lesson Number Two: it’s not all about the Silicon Valley model. Yes, Amazon is a high-tech company but that doesn’t mean it will base its decision on how many VCs operate in the neighborhood or that the National Institute of Health is a stone’s-throw away. As Miller puts it, “it’s not just about having assets. It’s about being a hub” – and being a hub is all about having enough people who are readily employable and supported by a solid commitment to train upcoming generations for that employment.

To that end, Virginia’s government plans to spend over $1 billion on tech education with a projected 25,000-30,000 increase in the number of computer science and related degrees in the next two decades. Meanwhile, Virginia Tech is building a new graduate campus focused on innovation while George Mason University is also expanding its tech program.

Lesson Number Three: Your problems may be solutions in disguise. Paradoxically, MDVA may have had an advantage specifically because it is a relatively slow-growing region that has seen many of its most talented tech professionals – exactly the kind of people Amazon wants to hire – depart for other parts of the country, especially Northern California. Yet enough of that talent still resides in the region; they just need a reason to stay. By contributing to a long-term solution to the regional brain drain, Amazon thus enhances its own value to the community and confirms the likelihood of a stronger long-term partnership with local government and civic groups. The combination of the region’s significant need with its significant resolve to fill that need should make Amazon feel quite welcome.

By contrast, we saw what happened in New York once Amazon felt quite unwelcome. Not that there aren’t similar gentrification-related concerns in Virginia, which has its own share of affordable housing activists complaining that the Crystal City package does not include housing earmarks.

But there’s nothing comparable here in terms of public hostility and grassroots resistance. People in Long Island City have deep roots in, and close identification with, their community. Not so much Crystal City; indeed, “National Landing” seems a welcome rebrand, notwithstanding the bemusement expressed by some locals. As a brand, “National Landing” creates a new community identity even as it suggests vital connections to the overall DC power structure.

Crystal City has been a community on the downswing since 2005 when the Peace Dividend closed the adjacent military installations on which its  economy fed. The 2008 economic crisis made matters worse and commercial vacancies now define the visible landscape. Amazon should feel quite welcome indeed.

Lesson Number Four: leverage the resources you have. As Jonathan Aberman points out, the local talent pool isn’t just made up of those tech-savvy professionals for whom Amazon’s arrival offers good reason to stay in the area. To the contrary, “our work force [also] includes deep, deep experience in politics and public policy, a managerial class that understands strategic growth,” says Aberman, founder and Managing Director of Amplifier Ventures, an investor and advisor to technology startups.

Aberman is one of the unsung heroes in this narrative. His report on the region’s innovation potential surprised a lot of people by highlighting its vibrant M&A market and entrepreneurial culture. As a result, the Washington, DC workforce could now be credibly depicted as innovative, not just bureaucratic – a transformation in perception without which the HQ2 campaign wouldn’t have gotten to first base. In countless speeches, in Washington Post and Washington Business Journal columns, and on his WFED radio program, he’s been a tireless promoter of area innovation. His vision, though, extends beyond technology.

As Aberman points out, Amazon’s very interest in the MDVA area proves the company wasn’t just interested in recruitable technology talent. If the company wanted HQ2 to replicate what it already has in its Seattle headquarters, it would have limited its search to more established tech corridors. Clearly, Amazon wants (and needs) a most diverse array of skills, including communications, law, government relations, etc.

Lesson Number Five: change the narrative. No contestant from the MDVA region could have won the beauty contest if Washington were still perceived as only a company town. The HQ2 victory may have confirmed MDVA as an innovation community but, Aberman reminds us, the perceptual transformation started long before efforts to attract Amazon. The ground had to be tilled first.

So, the story here is all about long-range thinking on both sides: Virginia, and area business leaders, with their significant investment in educating future generations – not just for Amazon, but to retain or attract businesses across the spectrum; and Amazon, with its keen sense of the future as a massively diverse and multidisciplinary place.

Richard Levick, Esq., @richardlevick, is Chairman and CEO of LEVICK. He is a frequent television, radio, online, and print commentator.