The Blessing and Curse of Charlottesville for High Tech

Four Charlottesville companies were named this year to the Inc. 5,000 list of fastest growing companies: SNL Financial, WillowTree Apps, Search Mojo and Silverchair Holdings. All four firms are located in downtown Charlottesville, which is emerging as a high-tech district of sorts. Proximity to a leading university and its supply of engineering and IT graduates is clearly a bonus, as is the enviable quality of life in the Charlottesville-Albemarle region.

But fast-growth firms are swimming upstream when it comes to growing their companies. Recruiting and retaining workers is not easy, reports the Daily Progress. One reason is that Charlottesville offers little opportunity for lateral moves between companies if someone hits a ceiling. Another is that two-income families can be reluctant to move to a region where it is difficult for the second wage-earner to find a job. Yet another is that young people are drawn to the “glamour of the big city” — singles prefer larger cities with more singles. It’s all about the mating market.

Charlottesville is a wonderful place. When I graduated from the University of Virginia in 1975, my greatest dream in life was to return to Charlottesville. I did so when I was 32. However, I soon discovered that if you weren’t part of the university community or the Farmington Country Club, the area didn’t have that much to offer. I landed in Richmond, where I found it far easier to make friends and where job options were more abundant.

In a knowledge economy, the critical ingredient to economic success is human capital. Economies of scale have shifted decisively to the larger metropolitan regions because they have much larger, more diverse labor pools. Charlottesville may be a superb incubator of small businesses but it will be very difficult for small companies to grow into big ones there. The same logic applies as well to Blacksburg, Harrisonburg, Lynchburg, Danville and other smaller metros (perhaps even to the Roanoke Valley). That’s not to say that it’s impossible to grow large, successful firms, only that it is far more difficult.

Indeed, some economic geographers are touting the rise of the mega-region, which suggests that even million-person metro regions like Richmond may suffer a competitive disadvantage.

I don’t like the trend. To the contrary, I find it incredibly dispiriting. I want to see Virginia’s smaller metros thrive. But facts are facts, and reality is reality. Virginia’s public policy makers should take heed.

As fellow blogger Don Rippert argues, Virginia’s two leading research universities — Virginia Tech and UVa — are located in small metro areas where the possibilities for spinning university knowledge creation into economic growth are far more limited than if they were located in one of the state’s major metro areas. From the perspective of maximizing the investment of state resources, does it make sense to privatize UVa and Tech and to concentrate on building George Mason University, Virginia Commonwealth University and Old Dominion University into higher-ed powerhouses that can support their regional economies? I don’t know the answer, but I think the question is worth debating.

— JAB


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  1. Peter Galuszka Avatar
    Peter Galuszka

    Even if UVA and Tech are unhappily privatized, I really don’t see the point that high tech centers must be in bigger cities. Los Alamos, where the a-bomb was designed, was miles from anything. It is still a major research center. So is Sandia not far away in Albuquerque, not a big city. Oak Ridge is the mountainous boonies.

    Many believe that C-ville and Blacksburg are much nicer places to live than Richmond or Norfolk. Pound for pound, they have as much, of not more, going for them in arts and sports.

    My guess is that your post is another shameless and lame attempt at boosting Richmond. It has never been a high tech research center. It has also been a blue collar manufacturing center (cigarettes and chemicals) and white collar service job center, especially government, health and law/lobbying.

    The vast majority of patents out of Richmond come from Philip Morris and duPont which really don’t have much to do with the landed university gentry (although Eugene Trani had an unholy alliance with PM and MCV was beholden to American Tobacco years ago.)

    Once again, Jimbo, it is reality check time.

  2. DJRippert Avatar

    Virginia is half pregnant with higher ed and high tech. The states that have capitalized on higher ed to generate jobs (centered on high tech) have all been around big or pretty big cities. Austin, Boston, San Francisco, etc.

    In every case, there is at least one top STEM university in the city.

    Virginia has several choices:

    1. Differentially fund universities in the big MSAs of NoVa, Tidewater and Richmond. Build the STEM program in the same way that Maryland build the program at UMD, College Park.

    2. Force UVA and VT to open serious campuses in NoVa, Richmond and Tidewater. Push more of the STEM programs into those locales.

    3. Pursue a concerted expansion plan for Charlottesville. Move the state capital there. Build a new airport.

    There are many ways to skin the job creation cat. To date, our state government hasn’t figured out any of them.

    As an aside, Oak Ridge, TN has a population of 27,000 and is 25 miles west of Knoxville (a metro area of between 600,000 and 1M depending on how it’s measured).

  3. re: STEM in the cities

    re: online education

    is DJ essentially agreeing with Peter that PHYSICAL is different/better/preferred to having the option of online?

    We had both Va Tech and UVA with a local presence at the rural R&D facility that I spent time at. I do not understand the “physical campus is best” thinking at all.

    Distance learning is fine and gets the job done. For those who absolutely must have a physical campus experience, fine – but pay for it – don’t expect taxpayers to subsidize it.

    A college degree should be something that any Virginian can attain regardless of their economic, demographic, or geographic status.

    Universities like UVA and Tech should have missions that recognize that overcoming these limitations are part of their mission.

    One of the most important and vital missions of education in Va is – retraining people who have lost their jobs to technology.

    we need much more of this and we need to recognize that a 40 or 50 year old may be just as an important focus as an 18 yr old.

    1. DJRippert Avatar

      You are missing the point of Jim’s post. He is asking how Virginia can capitalize more on its top tier universities. He is using UVA and Charlottesville to illustrate his point. It is a good point.

      As for “on campus” or “remote” – I’m not sure I care. That will sort itself out as colleges and universities try different approaches and see what works and what doesn’t.

      The key question, in my mind, is whether Virginia can turn the value of its public university system into a economic development engine for the state. So far, as Free Dem notes, our state seems to being doing a rather poor job of this.

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  5. Great post, touching on many aspects facing the Commonwealth’s economic future.

    First, “One reason is that Charlottesville offers little opportunity for lateral moves between companies if someone hits a ceiling. Another is that two-income families can be reluctant to move to a region where it is difficult for the second wage-earner to find a job.” and “As fellow blogger Don Rippert argues, Virginia’s two leading research universities — Virginia Tech and UVa — are located in small metro areas where the possibilities for spinning university knowledge creation into economic growth are far more limited than if they were located in one of the state’s major metro areas.” are dead on, in my own experience.

    After graduating from college a handful of years ago, I explored moving to Blacksburg to maintain a significant relationship I had at the time as my then other half finished with graduate school. There just wasn’t much in the way of support for entry-level jobs that actually needed a college degree and were able to support a person fully, instead of a low-skill part time job that supplemented a temporary, student loan-subsidized college lifestyle.

    There are few jobs in Virginia’s two major college towns for bright eyed and bushy tailed college graduates looking to start their careers, and as you continue to move up the ladder the ecosystem just isn’t as thriving as the lure of Washington DC and its suburbs.

    Related, “Charlottesville may be a superb incubator of small businesses but it will be very difficult for small companies to grow into big ones there. The same logic applies as well to Blacksburg, Harrisonburg, Lynchburg, Danville and other smaller metros (perhaps even to the Roanoke Valley). That’s not to say that it’s impossible to grow large, successful firms, only that it is far more difficult.”

    I think you’ve made this point before, and I remember specifically your take on the Tobacco Commission’s study of its work in Southwest and Southside Virginia. Blacksburg, Harrisonburg, Danville, and other smaller metro areas may struggle compared to Northern Virginia and Richmond, but it’s also true that these areas may be the last, best hope for economic development in their regions. Danville has more of a future than South Boston or a host of smaller Southside cities.

    Peter Galuszka, I suggest looking at “The New Geography of Jobs” by Enrico Moretti as it touches on New Mexico’s lack of a strong high tech industry despite its strength on the R&D side. Microsoft was in fact founded in Albuquerque and, as you point out, the state still has a strong base in R&D. But it doesn’t have a strong business environment that spins that innovation into jobs and economic growth, that happens in other states. Virginia just doesn’t want the reputation of breaking through with new innovation, we want the jobs made possible through this high-tech ecosystem to occur in the Commonwealth.

    Virginia has three major areas (NoVa, Richmond, and Hampton Roads) that may be large enough to support and sustain major economic growth in the 21st century in innovation and high-skilled industries. I have my doubts on Hampton Roads though. We are fortunate to have two major public universities, but they are unfortunately not located in these areas. And we have three more rural areas (Shenandoah Valley, Southwest, and Southside) that are not well positioned for the high-tech economy of the future, although they range from areas like the Valley which are well positioned in other industries like agriculture and natural resources to Southwest, where development of fossil fuel energy will remain a political football. Roanoke and Lynchburg stand out as sort of on the edge areas, not large enough to play a major role but perhaps not small enough to be doomed to decline.

    Right now our state doesn’t seem to care that much about emphasizing our strength in areas like Northern Virginia, or finding ways to spread the ideas churned out by our public universities.

  6. DJRippert Avatar

    Jim Bacon – I hope you read Free Dem’s comments …

    “Right now our state doesn’t seem to care that much about emphasizing our strength in areas like Northern Virginia, or finding ways to spread the ideas churned out by our public universities.”.

    He’s absolutely right. Hell, none of our state government elected officials or bureaucrats could even say whether Helen Dragas was right or wrong when she declared that UVA is facing “an existential crisis”.

  7. Kaine and McDonnell have largely ignored the role of universities as engines of economic development. Both Gilmore and Warner before them *did* give the subject considerable attention. Gilmore was a big supporter of the Center for Innovative Technology, which the General Assembly eviscerated in the 2001 recession. I recall that Warner set concrete goals to boost the standing of Virginia Tech and UVa in the Top Research University rankings. As memory serves me, they did not climb as hoped during his tenure but at least they held their own. Since then, I believe, both universities have fallen in rankings.

    As important as university R&D is for economic development, I am ambivalent. Research universities subsidize research activities by charging undergraduates considerably more than it really costs to provide them an education. Thus, research prowess is achieved, to some degree, at the expense of tuition affordability.

  8. DJRippert Avatar

    Jim:

    Here’s a bit of news from Northwestern University …

    http://northbynorthwestern.com/story/silvermans-golden-drug-makes-him-nus-golden-ticket/

    Funny how a top tier university in a big city can use its inventiveness to create wealth for itself.

    “Research universities subsidize research activities by charging undergraduates considerably more than it really costs to provide them an education.”.

    I wonder how much research at Northwestern is funded by the invention of Lyrica?

    Stanford earned $336M from the sale of the 1.8M shares of Google it received in return for giving the company the rights to the search engine technology invented by then grad students, now Google co-founders Sergey Brin and Larry Page.

    And that was from one of Stanford’s sales of Google stock ….

    You could pay the tuition and fees for every in-state undergraduate at UVA for several years with that money.

    The only reason Virginia doesn’t benefit from its universities in the same way as Northwestern and Stanford is because Virginia is run by a pack of dingbats called the General Assembly.

    And before any of you pop off about private universities vs public universities – UC Berkeley pocketed $62.5M in revenue as its share of immune regulating molecule CTLA-4 in 2011.

    Building good STEM programs is an avenue to both economic development and financial reward.

    Of course, the all powerful, lawyer laden, Dillon loving General Assembly must prevent a two term governor lest that governor clip their corrupt wings. So, even good plans like the ones from Warner and Gilmore die of neglect after the one term governor severs his or her single term.

    Virginia is broken, badly broken.

    1. My memory is fuzzy on the details but… About 10 years, either during the Gilmore or Warner administrations (or maybe earlier), it was pretty widely accepted that Virginia universities were inhospitable to the commercialization of technology from intellectual property developed there. Some significant reforms were introduced which improved the situation. But, to my knowledge, no one has re-visited the issue since. Did the reforms work? Who know? Do we need a Phase II set of reforms? Who knows?

      Gilmore did not have a techie background but he made technology a top priority of his administration. He created the office of secretary of technology and appointed Don Upton, a Northern Virginia technology executive, to run the office. Upton gave enormous visibility to technology-related issues in the state. Warner did have a techie background, and he likewise gave technology issues a high priority. But neither Kaine nor McDonnell have displayed much interest at all in technology (other than McDonnell’s higher ed STEM initiative), so nothing has happened.

      One of the aims of creating the Center for Innovative Technology aeons ago was to institutionalize the state’s promotion of technology. But CIT had trouble defining its mission in such a way as to sustain support in the General Assembly. It’s budget was slashed and now it’s a shadow of its former self. I hardly hear anything about it anymore.

  9. “Research universities subsidize research activities by charging undergraduates considerably more than it really costs to provide them an education.”

    I’m not sure how true this is, although I cannot claim to be an expert on the subject. At least at UVA, the research oriented aspects of the university feel more dependent on grants and other non-tuition based sources of revenue for their research. This may not be true, but it’s how many of the departments claim to operate. I doubt tuition is subsidizing the research at UVA, far more likely the bloated administration.

    1. Let me rephrase my statement: It costs more to provide STEM degrees than it does to provide degrees in the humanities and social sciences. Yet students are charged the same tuition.

      1. And yet ironically the humanities and social sciences do as well, if not better, than STEM in actually teaching students.

        http://thinkprogress.org/yglesias/2011/10/11/340824/why-liberal-arts-professors-should-learn-to-love-quantitative-assessments-of-student-learning/

        1. I’m not sure I understand the point here.

          STEM is harder to teach ..the material itself is more difficult.

          and the people teaching it, in order to teach it well, have to be virtually practicing engineers and scientists.

          STEM educations are what puts bread on the US table. It’s what powers our economy and keeps us technologically competitive with the rest of the world.

          I’m not denigrating liberal arts. They are important but we have to see the vital importance of STEM to the country and it’s well being.

          1. Why should engineering and computer science be harder to teach than science and math?

            I disagree with your framing that the material itself is more difficult than liberal arts. But even within your framing I don’t see why science and math are easier to teach than engineering and computer science.

            My point is that we already “know” how to teach liberal arts and humanities pretty well. We need to improve how we teach engineering and computer science.

  10. yeah, I doubt that research is financed by tuition also. Much of it is grants from govt and private industry.

    Of course, building and maintaining the facility and personnel credentials to attract “customers” is something the University itself has to pay attention to.

  11. DJRippert Avatar

    As for STEM being harder …. hmmmm….

    I remember a poem.

    Latin is a language, as dead as dead can be, first it killed the Romans, and now it’s killing me.

    One of the happiest days of my academic life was the day I traded in foreign languages for computer languages.

    FORTRAN was a hell of a lot easier than Latin.

    And don’t even get me started on the Chinese language courses I took at Dear Ole UVA.

    All the CS courses I took added together were easier than Chinese. And that was with Gilbert Roy as the professor – a genius if there ever was one.

  12. re: ” Why should engineering and computer science be harder to teach than science and math?”

    I think all 4 of those are harder to teach and to learn than most liberal Arts curricula.

    It pretty much describes the state of our education systems when you compare us to other countries.

    They beat us bad in science, math, and even English and this is confirmed in our country when CEOs complain that they cannot find enough US-educated technology applicants.

    These are called the “hard” sciences and instructors in those disciplines have to really know the material.

    When a student asks how a Derivative or a Linear Algebra problem “works”, the instructor has to not only know himself but he has to know it well enough to be able to explain it.

    In high school, these kinds of problems are called “word problems” in the back of the Algebra books and both students and weak teachers avoid them like the plague but it’s too everyone’s harm as these are the kinds of things that most 21st century jobs – require.

  13. notyourfatherseconomicdeveloper Avatar
    notyourfatherseconomicdeveloper

    Sorry I missed this thread last week. You take a very valid point that labor pools impact firm growth and go down some very “unique roads.” A couple of assumptions you really need to think about.

    1) The Stanford-Silicon Valley model is very old news. Technology centers do grow up without the presence of top tier research university (E.g. Portland, Phoenix, Boise).

    2) University towns can spin out their own healthy economies based not just on the start-up to IPO trajectory. Jim was very clearly focused on Charlottesville while some of the commentators lump Charlottesville and Blacksburg together. I am pretty sure no one has been to Blacksburg lately where the campus adjacent corporate park is home to 140 companies and 2,000 employees, and a second million square feet underway . Importantly its all sorts of companies: startups, “branch” locations for major firms (including DC-based firms), and a number of “lifestyle” businesses generating a few million a year and employing a few scores of people. The lateral move/training spouse issue is still huge in Blacksburg but the university and the tech park can and do this out for each other. And last year Virginia Tech opened a major r&d center in Arlington—having some impact on the access question.

    So if I’m right about those two things what would you get from this privatization scheme? The state doesn’t have the money to be a player in any major way (state funding at UVA And VT is well below 20%) so what could you buy ay Mason, VCU and ODU with the redistribution of those resource? And in VT’s case have you figured in paying back the original land grant?

  14. notyourfatherseconomicdeveloper Avatar
    notyourfatherseconomicdeveloper

    Depending on the starting point for comparison I think you might be wrong about research spending at Tech and UVA. I’m not sure how much credit the state should get but Tech has almost double since the start of the decade and while UVAs increase has been a bit slimmer.

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