December 2017

Many people see improving our roads and Metro as a shared goal that our region can rally around. I’d like to add another rallying point to this conversation: developing and expanding our region’s digital technology workforce.

Last week, the Greater Washington Partnership released a report that looked very closely at employment in digital tech industries — software development, data management and analysis, software technology engineering and IT management. Digital tech workers are among the highest paid in the country, and expanding digital tech employment drives the growth of leading regional economies.

Additionally, there are a broader range of jobs that aren’t digital tech industries but still require digital literacy. For example, many jobs in health care, law, accounting, advertising and media require comfort with digital technologies.

Taken together, digital tech jobs and digital literacy are highly important. Nearly two-thirds of the new jobs created in the United States since 2010 have required digital skills, and as digital technologies become increasingly integrated into the economy, the percentage can be expected to rise even higher.

Evaluated against these two realities — the need for digital tech workers and a broader workforce that is digitally competent — our region has a challenge.

There is good news. The report reminds us of our long history of leadership in digital tech employment. We should be proud of the role that our workforce has played in building the Internet, aerospace, wireless telecommunications, robotics, cybersecurity and bioinformatics industries, among others. Today 1 in every 16 jobs in our region is in digital tech.

But the GWP report has bad news for us, too. Although our region has one of the largest concentrations of digital tech workers in the country, we do not currently rank among the top 50 U.S. regions for job growth in this important job category. Over the past five years, the number of digital tech workers in our region has grown just 3 percent — only 8,000 net additional jobs — compared to a 12 percent national growth rate.

Moreover, it appears that our region educates digital tech workers who take their educations elsewhere when they look for work. Over the past five years, our region has produced a surplus of tech degree graduates. We had almost 14,000 digital tech degree graduates more than we had regional digital tech jobs filled. Yet at this moment, there are upward of 35,000 unfilled digital tech jobs in our region. It appears our graduates are either leaving for greener pastures, or are graduating with skills insufficient for the jobs that are offered.

Clearly something is not working in our region’s economy. The GWP report raises a number of reasons for this market disconnection. Our region’s employers as a group are not effectively signaling to educational programs the skill requirements for the digital tech jobs they have. National security requirements appear to inhibit the ability of government-reliant employers to employ applicants without bachelor or advanced degrees. Our traffic and housing issues result in quality of life concerns that encourage digital tech workers to migrate to other regions. A regional overreliance on service models for technology innovation encourage people who want to create digital tech product start-ups to go elsewhere.

I have no doubt that these are issues we can address as a region. We could identify mismatches between education and hiring by collecting and analyzing data and sharing insights. Direct involvement of our largest digital tech employers in creating educational syllabi, combined with internship and apprenticeship programs that they sponsor, could broaden opportunities for students to gain practical experience and have the right skills. For those that currently leave our region to pursue entrepreneurial opportunities elsewhere, we must give them reasons to stay by better supporting start-up business formation.

We have the resources to meet the challenge of digital tech workforce development. Let’s form a public/private partnership and get to work.


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Despite all that has been written about the proposed tax restructuring being considered by Congress, there has not been much discussion about how it will affect the D.C. region’s technology community. This restructuring will dramatically affect our technology economy and we will need to adjust. Let me explain.

As things stand now, if the tax restructuring is adopted as proposed, a corporation’s income from operations will be treated much more favorably than individual income derived from a well-paying job. In addition, income from a passive investment in a business will be treated much more favorably than the current income derived from the owner who works in the very same business.

These changes will put many of our existing businesses and most talented individuals at a comparative disadvantage. As I have pointed out in other columns, our technology community currently skews very strongly towards owner-managed businesses that are structured to provide current income.

Simply reorganizing as a corporation will not be suitable for many of these owner-operated businesses. Many provide current income to owners, many of them running small businesses, that is used to support families. Some must be structured to provide current income to investors as well. In certain instances, licensing and government rules require that these businesses be structured as owner operated. For all of these businesses, their effective tax rates will be higher than a corporation would pay. Depending upon the size of the businesses and its profitability, this will create a tax disadvantage that could amount to hundreds of thousands if not millions of dollars of taxes.

On the other hand, the changes in corporate tax rates, and the favorable tax treatment for passive investing will be a huge opportunity for investors. They will benefit from better tax treatment on current income from investments as well on long-term capital gains. This favorable treatment will have two important effects. First, it will give passive investors a large new pool of capital to invest derived from the large tax subsidies they will be provided. Second, it will encourage business owners who have the option to trade current income for longer-term business value, since the tax rate on a sale of an interest in a business will be much lower than the rate on current income paid by the owner.

Another area where the proposed tax changes will have a big effect will be our universities. Changes in the tax benefits to be gained from research and development may shrink funds available for sponsored research. Changes in the tax treatment of research fellowships will discourage students who don’t otherwise have the ability to pay for their graduate degrees.

Our highly paid workforce will also see changes in their tax bills, due to changes in the tax deductibility of local and state taxes and mortgage interest. These changes will adversely affect our region’s ability to attract and retain highly paid technical talent when compared to competing regions. The higher pay our region’s employers can offer will become less appealing, if it results in higher taxes and participation in a housing market where valuations are constrained or falling due to the loss of current tax benefits for owners. Transportation, education and infrastructure challenges in our region will also become more expensive to solve, if they require additional local taxes to finance improvements that are doubly taxed.

Taken as a whole, our region is facing a large adjustment if the tax restructuring occurs. How adversely we are affected will be driven by whether we can make up for the negative aspects by creating enough new businesses that will be attractive to investors and corporate buyers. For many years, I have argued that our region’s future requires that we change the model we use for technology-based business creation. That need is now even more immediate.

It is ironic that many of the people who most avidly support these likely tax changes are the same people who have consistently stated that “government shouldn’t pick winners or losers.” Hard to see the revision of the tax code as anything other than that.

But that doesn’t mean we can’t adapt to the new rulebook and make our own future.






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For many people, last week was the moment when Bitcoin registered as something they should know about, as it saw a sky-high boost in value.

Bitcoin is a currency. Society uses standardized currency to exchange things of value. When you sell something, you can either trade for some other good or service the buyer is selling, or you can receive currency – in other words, money – that you can then use to buy something from a different seller. There is nothing magical about a currency – it could literally be anything – provided everyone in a society agrees to accept it as such. 

Currency must have some consistency in its per unit value. If currency does not have a clear value, it is hard to buy things with it; the seller will always want more while the buyer says “only this much.” Additionally, a currency has to maintain its value over time, since the holder may not want to spend it right away. Currency only has value if we all believe it has value. 

This truth has made people uncomfortable for generations. History has shown governments have often forced its citizens to use a currency that is not desirable as a store of value, or undermined its value by unilaterally changing the value per unit of its currency (a devaluation), or creating large budget deficits that it finances by unilaterally creating more currency (inflation). This is why you often hear central bankers talk about inflation as a bad thing – they are afraid that an erosion in the value per unit of a currency will make it less desirable. It’s also why nations who have currencies that are not as stable will often put in place “exchange controls” which make its citizens unable to use other currencies that might be more stable or desirable.  

Bitcoin’s underlying operational structure – the blockchain transaction ledger system that supports it – is not subject to government scrutiny or regulation. Bitcoin is thus incredibly useful for people who want to hide their transactions and money from governments. But, it’s also attractive to people who fear government actions that could cause a devaluation of the currency they are currently using.  

Right now, people are taken with the rapid rise of the price of Bitcoin as a financial phenomenon. I think that they should be focusing on two things that are much more significant. The first is that much of the demand for Bitcoin is coming from nations that have exchange controls where citizens are using the anonymity of the Bitcoin market structure to avoid these controls.  

The second, which concerns me much more as a U.S. business person, is that the people are signaling that they think that it is worth much more than the U.S. dollars they are using to purchase the Bitcoin. As Congress is about to explode the U.S. budget deficit through some very ill-advised tax cuts, they should take note of this market signal. 

Since World War II, the U.S. dollar has been the primary international currency. This has benefited us tremendously. More than any other factor, this primacy has allowed our country to have low borrowing rates, low inflation and low energy costs. If the U.S. dollar loses its attractiveness because society finds a preferable currency for exchange (whether it is Bitcoin or any other currency) – the implications for the U.S. economy are grave: higher interest rates, higher inflation, higher energy costs and lack of price stability. 

History is littered with governments that eroded the value of their currency through financial imprudence. Our nation is not immune from this fact. If international investors, and our own citizens, lose confidence in the U.S. dollar we will pay dearly. Bitcoin’s rise could be a sign of trouble to come.  

That’s why it should matter to you. 

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