NYC Said ‘See Ya Later’ to Amazon: Why W.Va. Should Say the Same to Other Moon-Shot Projects

Feb 27, 2019

In the mid-1980s, West Virginia joined other states in a heated bidding for a Saturn vehicle assembly plant. Saturn was considered a brand-saver for the struggling General Motors, and many states viewed the Saturn plant as salvation for their own economies, bringing the promise of generations of well-paying middle-class jobs.

Tennessee eventually won the contest. At the time, GM officials said Tennessee was selected because of its location, as New South population centers boomed close by. But in West Virginia, we knew part of the reason we were passed over was the perception that Tennessee had a better school system, making the state more attractive to workers with children.

That didn’t stop West Virginia from trying to land mega-projects. When activists stopped the Walt Disney Co. from building a massive history-oriented theme park in Northern Virginia, West Virginia put up its hand, saying it would gladly take the sprawling complex.

This month, a small but vocal group of local New York residents, lawmakers and left-wing national politicians succeeded in making the future look so difficult for Amazon, and the online retail giant decided to abandon its plan to build part of its HQ2 in Long Island City. (Despite the fact that the majority of New Yorkers supported the plan.)

West Virginians may be thinking, “Huh. Must be nice to be so well off that you can say ‘no thanks’ to 25,000 direct new jobs.”

But that doesn’t mean West Virginia should make a what-the-heck phone call to Jeff Bezos or waste time trying to land any other massive, hit-the-lottery project. As alluring as they may sound, they’re not the right fit for West Virginia, and there are other ways the state can get its share of new job growth.

There are several well-understood reasons why West Virginia would not be seriously considered for a huge tech project such as Amazon’s HQ2. If Amazon says it needs 25,000 highly educated workers to staff HQ2 over the next few years, maybe West Virginia could cobble that many together.

But that’s not how employee dynamics work.

Amazon picks sites such as Seattle, New York and Washington D.C. not just because it’s easy to find 25,000 well-educated workers. It’s because Amazon knows it will need several times 25,000 workers over the lifespan of HQ2 as the original hires leave for other, better jobs in the region. That’s the devil’s bargain of big tech hubs: They have the kind of workers tech companies need, but those workers are highly mobile and will eventually leave for competitor employers in the region. Thousands of tech workers will not come to work at Company X in West Virginia because there’s no next job for them there.

Another reason West Virginia should pass on trying to lure Moon-shot projects are the massive tax incentive and infrastructure packages the companies demand. New York was willing to give Amazon $1.5 billion worth of incentives. A state the size of West Virginia can’t afford that. (Proposed 2020 state budget: $4.7 billion) More importantly, the blue-sky jobs and revenue projections almost never materialize. In general, offering massive public subsidies to private companies is bad economics, as WVU economics professor Brad Humphreys has soundly demonstrated in his work on publicly financed sports facilities and mega-events.

Rather, West Virginia can get its cut of 21st-century economic growth by encouraging small- and medium-sized startups, especially those that train workers for the middle-skills jobs that will continue to grow.

Flyover-country startup incubation has a powerful new advocate in Steve Case, former chairman of America Online. In 2014, his Revolution venture capital firm launched the $150 million Rise of the Rest seed-fund tour. Why? Because 75 percent of all venture-capital funding is directed toward companies in Silicon Valley, New York and Boston. Case wants to change that and has visited more than 30 cities on his Rise of the Rest tour. He is backed by big names including Bezos, Starbucks’ Howard Schultz and former Hewlett-Packard chief executive Meg Whitman. Case has been handing out funding checks to worthy startups.

Right now, Case is focused on existing startups in second-tier cities such as Kansas City and Detroit, but he should be encouraged to look at West Virginia entrepreneurs, such as Wayne County’s Coalfield Development, where Brandon Dennison is training workers for the post-coal economy. Hopefully, Case’s partner at Rise of the Rest, “Hillbilly Elegy” author J.D. Vance, can advocate for deserving startups in West Virginia and across Appalachia.

West Virginia has the talent and motivation to launch more promising ventures similar to Dennison’s. These small-but-scalable projects may not be a sexy as a Disney theme park or a shimmering tech campus, but they are a better fit for West Virginia and a better long-term bet.

Frank Ahrens is a public relations executive in Washington D.C., a former Washington Post journalist and editor of the Daily Athenaeum, and the author of the 2016 book, “Seoul Man: A Memoir of Cars, Culture, Crisis and Unexpected Hilarity Inside a Korean Corporate Titan.” (HarperCollins, 2016)

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