Amazon's arrival in Washington, D.C., could launch a 'war for talent'

With the arrival of HQ2, the District could move up to the majors as a tech capital. Photo / 123RF

I called real estate businessman Oliver Carr, after he had just come off a couple of days with his board of directors, during which the talk inevitably turned to Amazon.com's big reveal Tuesday that it would be bringing a regional headquarters and 25,000 future employees to Northern Virginia.

The board of Carr Properties had one message: "Amazon validates D.C., finally." (Amazon CEO Jeff Bezos also owns The Washington Post.)

"That's the big takeaway," said Carr, chief executive of Carr Properties and scion to one of the region's most prominent real estate families. "And there were a lot of smart people in the room."

Speaking of smarts, the Washington, D.C., region's mean IQ is about to rise with the arrival of those thousands of US$150,000-per-year (on average) engineers who will be working at Amazon's Crystal City headquarters, across the Potomac River from Washington.

One well-connected truth-teller, who spoke on the condition of anonymity because of the person's sensitive corporate post, said some of the area's big employers are concerned that the competition for cyber-jobs could get crazy.

"If you are in those businesses and have talented people with security clearances, they are very, very nervous," the person said.

"There's not enough talent to go around. Booz Allen, Lockheed, General Dynamics, Raytheon, all those people are highly dependent on talented and [security] cleared engineers. There is a real angst out there about this."

Investor Fred Schaufeld said angst is a good problem to have.

"I'd rather have an economic engine that needs control than have paddles connected to an economic heart that isn't beating," he said.

Carr said his board members think Amazon's presence in the Washington area will launch a technology snowball.

"One view was that now that Amazon is here, other big players - Google, Facebook and others - are going to need to be here," he said. "It's a war for talent."

The hiring issue vis-a-vis Amazon came up during a visit several weeks ago to The Post by Booz Allen's executive team. The Booz Allen executives said that they compete very hard for talent and that they would continue to meet their needs, should Amazon come to the District.

"We compete with Amazon today in the government sector, and we're more than holding our own in recruiting," Booz Allen spokesman James Fisher said.

"The challenges related to filling jobs requiring clearances is an ongoing issue that industry and government are working to address, and that would be an issue whether Amazon's here or not."

Techie entrepreneurs said that if there is a problem, it will work itself out.

"Amazon has a high-enough profile that it will certainly attract people nationally and internationally to the area," said Jim Manzi, a technology entrepreneur who runs Foundry.ai, a Washington, D.C., that develops artificial intelligence.

"It will grow the floor of technology-savvy people in the area."

"Talent shortage is really just another way to say progress," said Morris Panner, a Washington-area entrepreneur who is chief executive of Ambra Health, a digital health company.

Amazon "is going to bring more people and potentially more inflated salaries," Panner said. "But that's what you want. You have to figure out how to manage it so it doesn't make life unpleasant."

Panner said some of his tech cohort had reservations about Amazon collecting more than US$2.4 billion in government incentives from Virginia, New York and Tennessee, where it intends to create new work centers. There is also the issue of job inflation.

"People do worry about the cost of talent," Panner said. "If a software engineer can get a lot of money working for Amazon, that drives the price of talent up everywhere."

Most of Washington's identity as a technology hub has been aspirational, based largely on AOL's brief 1990s role as a vanguard of the Internet.

After that shooting star flamed out, the region's technology conceit rested with the defense giants, such as Lockheed Martin, and government consultants (so-called Beltway Bandits) such as Booz Allen.

There have been innumerable small-scale tech success, such as Applied Predictive Technologies, a Ballston, Va.-based semi-Unicorn that Manzi co-founded. It was bought three years ago by Mastercard for US$600 million.

But the region is, and always has been, a government town - full of lawyers, lobbyists, and more lawyers and more lobbyists. When I think of the homegrown fortunes here, I think of real estate (the Lerner family) and hospitality (Marriott), with some finance (Carlyle Group) and manufacturing (Danaher) sprinkled in.

That could change with Amazon.

"We want to be seen as the kind of place for business growth," said Linda Roth, a longtime local public relations professional who knows most everybody. "We're not just a government industry town."

The capital region has never broken into the first-tier of cities that house technology majors, like Seattle (Microsoft, Amazon) and Silicon Valley/San Francisco (Facebook, Google, Square, Twitter, Uber, Salesforce etc.). We probably don't even make the second team: Boston, New York, Austin.

"We never attracted big tech firms in a meaningful way," Carr said. "That's the big takeaway. Having Amazon here, hopefully, the dominoes fall and other big companies follow."

Developer Doug Firstenberg's firm StonebridgeCarras is building a US$1b, 2 million-square-foot Virginia Tech Innovation Campus in Alexandria, down the road from the Amazon headquarters. When finished in 2023, it will create a feeder for STEM (science, technology, engineering and mathematics) jobs.

"There has been a void in the Washington area for a long time for a technology district," said Firstenberg, a principal at the developer. "AOL died. The Center for Innovative Technology on the Dulles Toll Road never gained legs."

Washington had created the foundation for technology with early Internet companies such as UUNet and Proxicom.

"We built the middleweights, and now we have the heavyweight," said investor Raul Fernandez, founder of Proxicom and now vice chairman of Monumental Sports & Entertainment.

But Amazon as a stand-alone is not a game-changer, Firstenberg said.

"Business people are saying two things: One is, this is great diversification. The other thing they are saying is 25,000 jobs over 10 years is adding only 5 per cent to our overall growth," Firstenberg said.

"By itself, it doesn't dramatically change the Washington economy, unless it becomes a catalyst for other things."

He hopes the Virginia Tech and Amazon campuses could be the alchemy that leads to another Cambridge, Massachusetts, San Francisco and Silicon Valley.

"It's those places where you get the combination where you get live, work, play environment with intellectual horsepower," Firstenberg said.

Schaufeld called the Amazon play "instant critical mass."

That's good for him and his varied investments, which include restaurants, snack food, a T-shirt company and professional sports teams.

But Schaufeld cautioned that policymakers need to get it right.

"There's a requirement that the communities be smart about how they handle the growth," said Schaufeld, a part owner of Capital One Arena and its NBA Wizards and NHL Capitals.

"This should be great for nightlife, restaurants, culture. These are people at the most active part of their lives. They are spending. They are starting out. They have a real growth engine, and now have a unique ability to project the growth and energy to where they need it."

Schaufeld recalls coming to Washington for a high school day trip in 1977 and thinking, "Crystal City was really cool. Since then, it's kind of become boring."

The area evolved as a planned community, built by the Charles E. Smith Co., starting in the 1960s. It eventually housed thousands of federal employees in various agencies, including serving as a satellite office for the Pentagon.

Many of those offices were shut down in Defense Department cutbacks and its Base Realignment and Closure. Large swaths of offices have remained vacant.

"It's great to put something cohesive into Crystal City," Schaufeld said. "It's great to have a massive company there that's not feeding at the government trough."