Every now and then it’s important to just take stock of where our economy is. Our next guest very much has a finger on the pulse, the heartbeat of our region’s business community, that’s Andy Medici. He’s the money reporter at the Washington Business Journal. Andy, thanks for joining us.
MEDICI: It’s always a pleasure, Jonathan.
ABERMAN: Well, we recently had Stephen Fuller, of the Fuller Institute, release some new numbers for the economy. There was some good news and some “eh” news in there. How would you describe what we learned?
MEDICI: I’d say that’s pretty close. What we’re looking at is good and solid economic growth about 2.8 percent next year, but the real issue is that we’re not doing quite as well as the national economy, which is a bit of a disappointment. Greater Washington, as you know, should be an engine for growth, and in past years we have beaten the national averages. So that’s just, there is a bit of disappointment there.
ABERMAN: Why do you think that we’re lagging the rest of the country? Is it the composition of our business base?
MEDICI: I think, for a long time, federal spending did buoy us, and we had sequestration a few years back, and I think that while we’ve done a better job of expanding beyond that base and adding other types of jobs, we just haven’t done enough of that, and so we do lag behind, because we haven’t seen that level of expansion that we have in other places.
ABERMAN: You know, what I’ve seen in my own work recently with some of the things I’ve done with Greater Washington Partnership and elsewhere around the workforce, it appears pretty clear now that we’re a net exporter of talent to places like Northern California, New York and elsewhere. Why are people, who are significantly skilled, why do you think they’re leaving the region not staying here and driving our growth?
MEDICI: I think a lot of it is acquisition. We build great companies and we have a lot of great companies that are born and, so to speak, raised here. But when you have companies on the west coast, they come and they look for talent. They look for companies, they buy them. A lot of times, they move those operations to the west coast. Not always, but it happens. You know we’re one of those regions where people, they get trained here. They get skills here–cybersecurity. They get trained here by some of the best talent in the world, but when they’re looking for advancement, they go elsewhere.
ABERMAN: So you think that lagging growth in the private sector really is closely tied into our ability and need to retain the talent we’ve got?
MEDICI: I think that’s true and I think there’s a side part, which is as we’re adding jobs, some of those jobs are not as high powered, they’re not as high paying. We’re adding a lot of hospitality jobs and a lot of health jobs, but those are concentrated into lower paid sectors, so unbalanced we’re sort of losing ground on that front.
ABERMAN: So, turning attention away from those numbers which again I with you, it’s the glass half empty kind of view. There’s been a lot of discussion recently around the smartness–what a great word that is–but the smartness of using economic incentives to attract a big employer like an Amazon, vis-a-vis using the same incentives to grow local businesses. There’s been a lot of talk around Amazon over last few weeks. What do you think about that? Are people talking about it that way?
MEDICI: Yeah, Amazon is one of those interesting situations where they have essentially created a pitch competition or a sort of bachelor program for themselves, where they are courted by all the different localities across the country. And, you know, Greater Washington, for people who have been paying attention–three areas, Montgomery County, D.C., and Northern Virginia landed on the list of twenty. So, fifteen percent of their finalists list is us, and all of those are going to be competing against each other, too. So, it’s one of those situations where Amazon knows that they’re gonna get a big bucket of incentives, and that’s probably part of the reason why they did it.
ABERMAN: So when you’ve talked with people around this, it sounds to me like you’re hearing that the three regions really are going to compete with each other from a standpoint of offering incentives, rather than throw it all in a single bucket?
MEDICI: Right. The way in incentives are structured, as you know, is that states, they want those jobs there, and so they’re not probably going to be willing to part with that money if they go even close by. Even though an Amazon HQ would probably be good for the whole region in terms of where those people live and where they work, and where they play. But at the end of the day, one state’s going to want it and they’re going to put up the money for it. And we’re going to see something a lot like what happened with Foxconn in Wisconsin: one state winning and offering a very huge number when it comes to incentives.
ABERMAN: So I believe that the numbers that we’ve heard leaked so far from Maryland was and exceptionally large number, and billions of dollars and of that, roughly two billion dollars was around transportation improvements for fifty thousand jobs. Yet, I hear that from places like Greater Washington Partnership that our local employers need hundreds thousands of new workers in the next five years, just the twenty companies of the Greater Washington Partnership–companies like Capital One or General Dynamics. Why aren’t governors just fixing Metro and our roads to take care of those people?
MEDICI: That’s a good question. I think, whether you can get growth from Amazon of fifty thousand jobs, or you can get fifty companies to create a thousand jobs through broader based taxes, that might be a better way to go. But for people that want to see those big names, that want to see those marquee companies, choose D.C. as a sort of feather in the cap. Nestle coming to Arlington was considered a big win for McAuliffe, but at the end of the day, politicians are focused on wins, and they want to show those wins. And it’s harder to show a hundred companies adding a hundred jobs each, than one company adding ten thousand.
ABERMAN: It’s sort of like the difference between being a really really pesky singles hitter or somebody who home runs a lot and strikes out a lot. Who gets more play?
MEDICI: Right, but you know, at the end the day, people who get to the hall of fame are consistent. Consistency is what gets you there.
ABERMAN: You’ve been following the business community for quite a while. We’re clearly in a period of growth, but also a period of change. When you meet with entrepreneurs to see companies, where are the industries, where you’re seeing some some real energy right now?
MEDICI: We always see a lot of growth in cyber. Cyber has a lot of acquirers, but D.C.’s actually done a great job in a few fields that are more surprising–education and education tech. We have a lot of smaller companies that have sort grown up around–K12 Inc, around 2U, around Graham Holdings Kaplan. We have a lot of those smaller companies, and they’re doing a good job. So you have cybersecurity, you have education, and I think you’re also seeing larger growth in hospitality that you haven’t seen previously, as communities fill out, as neighborhoods fill out, and people are really starting to see that sort of growth in restaurants and food. While they’re not the high-paying jobs that we might be used to from federal workers, that’s where a lot of that growth is.
ABERMAN: I have people all the time complain to me there’s not enough capital in this market to grow a startup. So I know you’re in middle of it, people talk to you all the time. I’ve got other people telling me that the reality is, every great company can find capital. What’s your experience?
MEDICI: I think there is a little bit of truth to both–and not to be wishy-washy about it, because I think any great company will have venture capitalists stumbling over themselves to offer that company money, and so I think that there is truth to that. However, I think there’s a lot that can be done around minority businesses, around women-owned businesses, places and companies that don’t have that initial family and friends around. So when we talk about early stage funding, in my mind, I want to see more work to be done to get people who have those great ideas, who have those great companies, but they can’t scrape together that initial ten or twenty thousand dollars. You have a lot of people in poorer communities who have these ideas, and have these great startups, but there’s no pipeline between them. So I think, that’s where there needs to be a lot more work to be done.
ABERMAN: You know, it’s interesting to me say that, because I know in the valley, forty percent of startups are started by immigrants.
MEDICI: Yeah, we attract the best and brightest from other countries, and I think that’s an important thing to mention, is that a lot of them are immigrants and we have a lot of people here who can do it too, and it’s just setting everyone up with that level of funding. And I think, all too often, that’s forgotten when we talk about lower levels of funding, about seed funding.
ABERMAN: Well, as always, Andy, it’s great to have your perspectives on the show. I’m sure we’ll have you back soon. Meanwhile, keep up your good work following the business community at the Washington Business Journal.