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All the President’s Men … Are Going Dotcom

Talent from all around the Beltway is driving toward Washington’s high-tech industry.

Jonathan Kaplan’s résumé reads like the Declaration of Independence in a library of PERL manuals and Java bibles. He never studied computer programming, founded a startup, or mastered the art of Web marketing. But last fall Kaplan turned heads when he forfeited an enviable position as chief of staff for President Clinton’s National Economic Council to join the leadership team at a burgeoning textbook e-tailer, VarsityBooks.com. He’s hardly the only Beltway insider ditching public-sector prestige for a digital jolt. The exodus is under way.

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The “great sucking sound” emanating from the nation’s halls of power can’t be blamed on politicians’ hot air or noxious double-talk. Today, thousands of federal workers are leaving government jobs for digital futures. “We have seen Washington shift from being a government-based area to a major player in the high-tech industry. That’s a major transition,” says Fran Witzel, a former engineer who heads a local networking organization for entrepreneurs.

Department of Defense engineers invented the World Wide Web’s precursor on the city’s outskirts in the late ’60s, but the early digerati remained largely invisible. Now, for the first time in DC history, high-tech employees outnumber government workers. This is a pivotal time for the nation’s capital. Once a one-industry town, DC is clearing room among old-school pundits and politicos for new local heroes like America Online’s Steve Case.

Stock options tempt many, but Jonathan Kaplan says he defected from his conventional DC gig for the opportunities offered at VarsityBooks.com — not the promise of a six-digit salary or an Amazon buyout. He wanted out of politics, but couldn’t envision a career in Washington’s other traditional industries: law and lobbying. Dotcom dreams lured him away.

“It’s been as wild a ride as the Clinton White House,” Kaplan says of his nine months as vice president of strategic planning. That’s saying a lot considering Kaplan worked for the Clinton-Gore administration during Monicagate and the impeachment hearings. It seems little can rival an Internet IPO.

Political Disillusionment

Other government insiders switch tracks after finding that political life falls short of their expectations. Seth Fox spent four years on Capitol Hill as a research staffer for Democratic senator Tim Johnson before launching his own Internet company in July 1999. “I was interested in helping people better their lives. I thought that working on the Hill would be a way to do that,” he says. “After a while I grew frustrated with the bureaucracy.”

Though Fox’s company — an online shop for New Year’s Day 2000 souvenirs — came to its natural conclusion in February, Fox says there’s no going back to a career in politics. “I’m in control of my own destiny,” says Fox, who now works as a freelance e-commerce consultant. “I’m not just a cog in the machine.”

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The dotcom magnet draws political novices and veterans alike. Kyle McSlarrow, national chairman for Dan Quayle’s failed presidential bid, recently joined the DC office of a political portal called Grassroots.com that is based in San Bruno, California.

“I watched the phenomenon taking place and grew interested in what the Internet could offer,” says McSlarrow, a former deputy chief of staff to two Senate majority leaders. “The very nature of political discourse is perfectly suited to an online medium.”

As it turns out, McSlarrow says, building a new company isn’t so different from engineering a life in the political fast lane. “A lot of work, a lot of long hours, and a real sense of vision and mission,” he says. “All of that feels very familiar.”

Angelo Ioffreda, director of internal communications for America Online, agrees. Ioffreda began working for AOL in January 1999 after a 12-year career with the U.S. Department of State — including stints with the U.S. embassy in Argentina and the department’s crisis control center. Despite his decidedly un-tech history, Ioffreda says his transition to the private sector was a natural one. “Diplomacy is public relations. You just don’t call it that.”

Ioffreda believes government workers are well suited for jobs in the new economy. “Politicos tend to be very bright and well educated,” he says. In fact, Ioffreda says his company recruits heavily from the federal government. Most of AOL’s communications staff hails from the Hill, Republican or Democratic headquarters, or the White House. AOL’s director of security is a former FBI official.

Of course, some dissent must be expected in Washington, DC “These people are in a different world,” columnist Rowland Evans told the Washington Post in April 2000. “They never wear ties. They retire at 30 in their fabulous houses. I don’t even understand their language.”

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The Brain-Drain Headache

Today, more than 50% of international Internet traffic passes through switches and cables in Northern Virginia. But venture-capital groups and regional Internet forerunners like AOL are truly fueling Washington’s growth as a technology center. In early 2000, $842 million in venture capital flowed into the DC area — a 31% increase from the previous quarter. If high-tech business continues to grow at such a staggering pace, some say dotcoms will pillage the public sector with increasing ferocity in coming months.

That’s bad news for traditional DC law firms and think tanks. Washington still houses more lawyers per capita than any other city in the world, but nowadays more and more law school graduates are forsaking private law firms for high-tech companies — or their own startups. In an attempt to stem out-of-control attrition, most area law firms raised salaries for young lawyers more than 25% across the board in March 2000. Lawyers fresh out of school can now command starting salaries as high as $160,000.

At the U.S. Securities and Exchange Commission, staff lawyers are defecting at such a staggering rate that Congress is considering legislation to increase pay there as well. Other government agencies are feeling the squeeze in internal IT departments. Earlier this year, the National Institutes of Health lost 10 key high-tech workers to just one Internet startup. Others are giving notice with increasing regularity, says Stephen Benowitz, NIH director of human resources. “Salaries we can match, but high-tech professionals are really going for the stock options,” he says. “They see what’s happening with IPOs and they want to get in on the ground floor.”

Kay McGrath, a former aviation lobbyist with PricewaterhouseCoopers and a DC native, says salary and stock options aren’t the issue. Money, she asserts, had little to do with her decision to join the sales team at Primeshot.com, a DC startup that coordinates special-event photography online. “You turn on the television and it’s ‘B-to-B’ or ‘B-to-C’ or ‘IPO,'” she says. “You’d have to be brain-dead not to notice this huge wave gaining momentum. Who wouldn’t want to be part of the Internet revolution and shape its direction?”

Sidebar: DC’s New Economy World: A Changing Landscape

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