CyberX Not Just an Amazon.com Subsidy

Virginia economic development officials have kept their lips tight about the incentive package Virginia is extending to Amazon.com, Inc., to induce the e-commerce giant to locate its second headquarters in Northern Virginia. My concern has been that the Commonwealth might attempt to outbid other states in dangling obscene tax breaks and subsidies to attract the project, which could  generate $5 billion in investment and hire 50,000 employees. But as it turns out, it looks like Virginia might be taking the right approach.

Del. Chris Jones, R-Suffolk, chairman of the House Appropriations Committee, made some reassuring statements to Michael Martz in the Richmond Times-Dispatch reporter’s article today about the CyberX initiative.

[Jones] and other state officials would not comment on the contents of a state incentive package to land the coveted headquarters, but Jones confirmed the state would rely heavily on indirect incentives, such as investments in higher education and transportation improvements that Amazon has made priorities in the high-profile search it began in September.

Prominent among those investments, apparently, is CyberX, a $50 million initiative cooked up by Jones and Virginia Tech President Timothy Sands during the General Assembly’s extended budget deliberations earlier this year. Here’s the thing: CyberX, which aims to address the unfilled 30,000 positions in cyber-security and related jobs in Northern Virginia, represents a workforce-related investment that Virginia needs to make whether Amazon decides to locate in Virginia or not. The severe cyber-security skills shortage is throttling on growth in Virginia’s most economically dynamic region. If we could solve this issue, we’d get plenty of economic growth with or without Amazon.com.

As described in the budget amendment, modest sums will be allocated to the initiative in the upcoming fiscal year, with a bonanza scheduled for FY 2020. The initiative will consist of a “primary hub” located in Northern Virginia with a network of “spokes” linking to other universities around Virginia for the purpose of building “an ecosystem of cyber-related research, education, and engagement that positions the Commonwealth as a world leader of cybersecurity.” Virginia Tech will serve as the “anchoring institution” and coordinator of the Hub.

Funding includes:

  • $15 million to the Virginia Research Investment Fund (VRIF), which will do two things: (1) certify public institutions of higher education to participate as “spokes,” and (2) provide matching funds for faculty recruitment.
  • $10 million for Virginia Tech to lease space and establish the Northern Virginia Hub.
  • $15 million for Virginia Tech to provide research faculty, entrepreneurship programs, student internships and educational programming at the Hub.
  • $3 million for a cyber-physical systems security lab at the Hub.
  • $3 million to support cyber-physical systems security labs at spoke sites across the Commonwealth.
  • $3 million to establish a machine learning lab at the Hub.
  • $1 million for classroom and distributed learning infrastructure improvements at the Hub.

Increasing the capacity of Virginia’s higher-ed system to train cyber-security employees may be a necessary condition for addressing the yawning IT skills gap, but it may not be a sufficient condition. Several questions arise.

First, how much of this money is going to workforce training and how much going to academic R&D? Martz’s article focuses on the fact that Virginia Tech and George Mason University are getting $250,000 each to hire a top cyber-security researcher. How does more research impact the skill shortage?

Second, is there a sufficient supply of high school graduates with the academic preparation and aptitude to enter these programs — or will Virginia Tech have to recruit aggressively from outside the state to find students?

Third, given the high cost of housing and the horrendous, soul-draining traffic congestion in Northern Virginia, will graduates of these programs even want to seek employment in the region — or will Virginia spend money to develop the human capital that other metros end up hiring?

Fourth, Jones’ comment to Martz implies that the General Assembly might be willing to make additional transportation “investments” in Northern Virginia, which are sorely needed. But what magnitude of such investments will be required to diminish NoVa traffic congestion to a degree that anyone can notice?

Despite those questions, CyberX strikes me as sound strategic thinking. The initiative serves an indisputable need, and the funds invested don’t put money in the pockets of a company with the world’s largest market capitalization. The investment builds Virginia’s capacity for cyber-security innovation.

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6 responses to “CyberX Not Just an Amazon.com Subsidy

  1. Yes, agreed, and it very much follows in the tradition of the higher ed and R&D package devised to seal the deal with Rolls-Royce in 2008, as I discussed a while back. I’m sure there are also direct incentives on the table, as well, but these should benefit the general economy.

    There are also stories around today about the pressing need for workforce in the shipbuilding and ship repair industries to support the growth spurt expected for the U.S. Navy.

    The jobs exist or are coming. You are also right that a key unanswered question is whether there is a deep enough pool of young people coming out of high school who have the math and science basics and the work ethic required for these technical jobs – those needing a BS and those not needing a degree. This is the hard stuff.

  2. This is a plan that should have been executed stand-alone without Amazon.. and attract more/other companies… and significant that VaTech 400 miles away is doing this instead of the Koch-infested GMU more interested in ideology than real world economics where they can actually demonstrate their
    “Conservative” economic values!

  3. I continue to question the reality of Amazon having 50,000 employees at their secondary headquarters. If you assume 200 sq ft per person you need 10 million sq ft. 23,000 people work at the Pentagon. Amazon’s primary headquarters in Seattle has 40,000 people and folks are getting laid off there …

    https://www.theverge.com/2018/2/13/17007236/amazon-job-cut-seattle-hq-global-operations

    50,000 people would be Virginia’s 12th largest city. Bigger than Charlottesville and Harrisonburg but smaller than Lynchburg. Add spouses and children and it looks more like Virginia’s 5th largest city.

    Amazon is feeding these state economic development departments a fairy tale.

  4. CyberX sounds like the most intelligent economic development plan I’ve ever heard coming out of Virginia. Virginia Tech getting serious in NoVa is a huge step in the right direction. If they can make the collaboration-at-a-distance work it will be very good for the Roanoke area too.

    • Is it really servious? That is the question. If so, yes, it’s serious progress in a place now stuck fast in the muck of gridlock and dysfunction. The question is whether you can trust what the great majority of our leaders say today. No, obviously not. You cannot trust what our leaders say today based on the obvious facts of recent history. Too many liars out there are lying. So I doubt the consequences of all of this. But, yet again, we will see, won’t we.

      • In any change effort there are two main factors – strategy and execution. Strategy without execution is hallucination. The strategy looks good (assuming our often dissembling political class can be trusted). As for execution … I have my doubts but – we’ll see.

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