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2005: Digital Capital of the New Economy

Remarks by Mario Morino,
Chairman, Morino Institute,
at Potomac Conference XII
January 8-9, 1999

These comments, "2005: Digital Capital of the New Economy," were presented by Mario Morino at Potomac Conference XII. Morino is the founder and Chairman of the Morino Institute http://www.morino.org and the Potomac KnowledgeWay http://knowledgeway.org and founder of the Netpreneur Program http://netpreneur.org.

The conference, a project of the Greater Washington Board of Trade, was the twelfth annual convening of a representative group of the region's leadership from the public and private sectors to consider the long-term future of the Greater Washington region. Its purpose being to build a vision for the future and the means of attaining that vision, with the guiding principle for this vision to build a world-class connected community.

I. Introduction

Thank you and good morning. It is a pleasure to be here and to share with you my optimism for the future of the Greater Washington region.

Peter Schwartz, the cofounder and chair of Global Business Network and author of The Art of the Long View , characterizes the time we are in as a remarkable period of transformation, which he describes as a "long boom." In fact, he sees this as a 40-year boom, spanning from 1980 to 2020. This period of economic and societal transformation, he says, is driven by a continuing stream of new technology, not the least of which is the Internet. Another factor is the relentless process of globalization, which opens up national economies and integrates markets to drive global growth. As we approach the year 2000, half-way into this 40-year boom, we are surging forward as a New Economy takes hold.

This New Economy, although global in nature, is clearly emanating from within the United States. And, we, here in the Greater Washington region, possess the tools for fostering its growth—telecommunications, Internet and E-commerce. We also have the raw materials in abundance—talent, ideas and intellectual capital. Already the most powerful government in the world, Washington has evolved into a global technological leader.

Much of this will unfold on its own, as part of the natural economic evolution of this region. But to realize our full potential, there is much that we can and must do as a community of leaders, not only to further stimulate economic growth but to ensure a high quality of life that is pivotal to our success over the long term.

We must intensify our efforts to create and sustain an environment conducive to the entrepreneurial ways of the New Economy, and we must provide for a quality of living that will attract and retain the best and brightest talent. Ultimately, our goal is to create a better way of life for our children and their children and for all those who call this region home.

Our efforts of the last few years have only started us on this journey. What we do in the next five to six years is crucial to our destiny. If we truly come together as a region, widen the circle of leaders who can propel and nurture change, and extend the already significant efforts underway to build a critical mass around the New Economy, we can, indeed, become its Digital Capital.

II. A Trip to the Future of the Greater Washington Region

To envision what is possible, let's jump forward to January 9, 2005, just six years from now. Imagine that we are visitors to the region, about to take a tour of this 21 st  century community, which, by 2005, has become one of the fastest growing metropolitan areas in the world. Our flyover starts as we depart from Dulles Airport. It is hard not to notice the expansiveness of this facility, now the hub of a world-class network of regional airports.

As we clear the runway, we immediately notice the names of telecom, Internet and E-commerce firms that mark the new development around Dulles Airport and the Center for Innovative Technology, as well as the string of new corporate campuses along routes 28 and 7 in Loudoun County. In Tysons and Reston, E-commerce and Internet firms are so densely concentrated that they have blurred what had previously been separate commerce centers. The signs along the Dulles Toll Road read like a Who's Who of E-commerce. Rosslyn, Old Town Alexandria, Ballston and Falls Church have all become centers of this InfoComm activity, with the expansion moving westward along route 66 well into Prince William County. From the air, it is abundantly clear that the efforts of recent years to make Virginia the Internet State have paid off handsomely.

Heading over the Potomac River into Maryland, as we look down we see the brick and glass buildings of more than 500 bioscience firms and research labs, bordered by the National Institutes of Health in Bethesda and Johns Hopkins University in Baltimore. Maryland's long-time commitment to biotechnology and life sciences has now yielded the returns that folks had forecast for the 1990s. Panning back across I-270 and over to I-95, we find a concentration of telecommunications suppliers, a cluster that has grown from the anchors planted in the late 90s by Yurie Systems, now part of Lucent, and Ciena, just outside of Baltimore. And a little further south, satellite, wireless communications and spatial systems firms extend out of NASA Greenbelt. Closer to the District, we view the long awaited revitalization of downtown Silver Spring, now a multimedia entertainment strip with new media and content businesses that have grown up around the American Film Institute and Discovery Communications.

As we come back down over the District line, we witness a heartening commercial and cultural renaissance in the District of Columbia. We are told that for the first time in decades more people are moving into DC than leaving it, and experts say its population will grow significantly by 2020. Fueling this growth are clusters of new media firms and design studios that have sprung up in Georgetown, Lafayette Square, LeDroit Park and Van Ness. Along New York Avenue, we see a growing industrial corridor, and in NoMA, the area north of Mass Avenue, there is the further development of a telecom and media complex that has been growing since Qwest Communications located here in 1999. A bustling, high-tech community stands on the site of the old Navy Yard, while across the river is a revitalized Anacostia waterfront.

As we tour our region, something else is evident, though harder to see from the air. Throughout the region there is vibrancy as economic success has helped energize the region's cultural institutions. The influx of young professionals has created a demand for new theaters, cinemas, galleries, restaurants, entertainment centers and museums. The universities are more naturally integrated into their communities, adding to the quality of life in their surrounding neighborhoods. The region is teeming with activity. People are out and about, yet surprisingly our streets and thoroughfares appear less congested. The region is alive.

After landing at Reagan National Airport, we shuttle over to the new Convention Center, built in 2003, where the fifth annual Internet Policy Summit is in session, with more than 5,000 attendees from all around the world. As we listen in, people are talking about two moments that forever changed the region.

First, the Human Genome Project, coordinated by the U.S. Department of Energy and the National Institutes of Health, and advanced by entrepreneurial firms in the region, completed the full mapping of the three billion human DNA building blocks in 2003, several years ahead of the original schedule. This success has triggered what some call the "biocentury." And, with the convergence of InfoComm and bioscience, companies here are developing "bioinformatics" services for the global marketplace.

Second, America Online has become to E-commerce what GM was for cars, IBM for mainframes and Microsoft was for PC software. Its growth has fueled an entire industry of digital suppliers across the region and, in collaboration with the research labs here, advanced breakthroughs that spawned a thriving new industry known as "usability engineering." As a result, centers like the University of Maryland's Human Computer Interface Lab and GMU's Visual Information Technology Lab are now recognized as preeminent in their fields.

What is clear is the depth and breadth of the region’s strength in the New Economy. That strength developed because leaders here were committed to creating a connected community—one where ideas, information and trust flow freely, breaking down traditional geographic and industry barriers. Here is what happened:

Access to Capital Increases . The region now ranks with Silicon Valley as the top place in the world of VC financing, as mezzanine, venture capital, angel funding and M&A transactions rose dramatically. Several hundred venture firms are located in the region, thanks to the efforts of the Mid-Atlantic Venture Association (MAVA) to increase awareness of the region's potential. Even Kleiner Perkins Caufield & Byers, the preeminent Silicon Valley VC firm, opened an office in the region in 2001. And, those entrepreneurs who made a significant amount of money in their own ventures gave back by investing in young startups. Two angel groups, the Capital Investors formed in 1998, and the Dinner Club founded in 1999, sparked this angel-investing boom.

We Reach Critical Mass. Internet professionals in the region, those who build the tools, pipes and software to make it all work, mushroomed. Many work in the government research labs and agencies and in universities and think tanks on the development of newer, faster versions of the Internet. Internet and software giants like MCI WorldCom, Cable & Wireless, Network Solutions, MicroStrategy and SkyCache employ thousands. At the same time, increasing numbers of Internet-focused entrepreneurs feed off the demand of the larger companies and provide components to make networks function faster, better and easier.

The Federal Government Joins the New Economy. Business and political leaders fully understood the unique benefits of the federal government’s presence here. As the largest consumer of InfoComm, the government has swelled the ranks of technology vendors that set up operations to serve the federal market. As the world's largest producer of information, it has spurred the growth of a thousand businesses that mine and package federal information—all of it distributed over the Net. And as the country's venture capital source for basic research, it has channeled huge amounts of funds for research into our universities and labs. This research has resulted in important breakthroughs, nascent commercial applications and has stimulated yet another wave of entrepreneurs. Finally, as the world's largest integrator of technology, the federal government serves as a spawning ground to develop talent that moves into private enterprise or creates new entrepreneurial ventures.

An Ecosystem Takes Form. The region has taken significant steps to preserve its most treasured asset—talent—by developing a network that matches the growing needs of businesses in the New Economy with the people and firms that can fulfill them. This network has taken on the qualities of an ecosystem. Firms in dire need of talented people have forged links with colleges and universities, regional organizations and associations to create this flexible network. Operating over the Net, it now allows those with the expertise and critical skills to connect with those who seek it quickly and efficiently, anywhere, anytime, all the time. This network has been instrumental in mitigating the region's talent shortage and has served as a powerful incentive to attract and retain talent here.

A Knowledge Industry Emerges. The Greater Washington region is the center of the knowledge industry, which encompasses everything from corporate training to biological research to federal and financial data banks. This industry came into being as entrepreneurs exploited and integrated unique regional assets—huge repositories of information and cultural objects, content production firms, digital networks for distribution, and associations and trade groups that provide affinity marketing. Phillips Publishing, National Geographic, VerticalNet, the Library of Congress, the Smithsonian Institution, HealthScribe, Engenia, Discovery Communications, Caliber and the Nature Conservancy are all part of the knowledge industry.

Services Go Global. The region's professional services firms and associations are benefiting from a global demand, as they use the Net for service marketing and delivery. Companies, like the architectural firm Dreamscapes, deliver high-end residential design work to locations around the world using digital networks from here in the region so that the principals seldom have to travel. Similarly, firms here that provide services in management, finance, transportation, defense and aerospace, hospitality and environmental management now have a global reach.

The Region Creates an Internet Institute. An Internet policy and research institute, established in 1999 by leaders from business, academia and technology associations, has gained recognition as the forum for legal, economic and technical policy matters of the Internet. Its very formation was a symbol of the cooperation for which this region is now known. The institute, in conjunction with the region’s universities, has 25 endowed chairs, each with a $1 million or more in support, and has become an invaluable resource for businesses and for federal and state public policy makers.

Government Goes Digital. Business and community leaders lobbied heavily for appropriations, especially at the federal level, and then worked with federal, district and state officials to digitize the delivery of government services. An ever-increasing amount of government information is being put online. Much of this work is contracted to systems integration firms in the region, generating significant revenue into the regional economy, with the flow expected to continue until 2010. Over the Net, citizens can now process permits, file their taxes, seek out specialized information, and reach out more effectively to local, state and federal lawmakers, agencies and other voters. Polls indicate that Americans, having directly benefited from these actions, are less cynical about government than they were in the late 1990s.

Break-through Occurs in Education. The region's leaders ensured that the educational system, at all levels, was fostering the development of critical thinking, analysis, problem solving, communication, adaptability, team work and technology and information literacy—basic skills for the New Economy. And they concluded this work was not best done by focusing on filling classrooms with PCs and Internet connections—something that technology vendors advocated—but by advancing more basic solutions: improved professional development and support of teachers, better models for parental engagement, alternative sources for education and more effective leadership in education. They viewed technology as a powerful tool in a larger arsenal for educational reform, rather than an end itself in educating our children.

Internet Is Viewed as a Regional Resource. The region accepted the Internet as a vital part of the daily life of its citizens. Just as the railroads, automobile, electricity, telephone and interstate highway systems radically changed the way we live and work, so have telecommunications and the Internet. Planners integrated the use of communications networks into a larger strategy that included improving roadways and expanding the Metro rail system necessary to address the region’s traffic problem. Regional planners now consider the Internet an essential component of transportation, healthcare, real estate development, environmental management, entertainment and public safety. These developments have helped to market this region as a gateway to the future.

Last Mile Is Connected. More than 80% of the region’s households are linked into the Net, with more than half of them using high-speed access. The region's leaders advocated for increased competition in local markets to push this low-cost high-bandwidth connectivity. And, the regulators delivered, with policies that helped to open the market to more companies to provide this crucial resource to tens of thousands of home offices and small businesses.

So in the year 2005, the New Economy is flourishing across the region, with greater economic balance among Northern Virginia, Maryland and the District. Telecom, the Internet and E-commerce continue to be the driving force of our economy’s growth, with bioscience poised to deliver the next wave in the following 10 years. A healthy trade in exports in professional services and the knowledge industry continues to grow rapidly, while international business in the region continues to expand.

Our leadership—both the younger guard and the more established group—rose to the challenges facing our region in a creative form of civic entrepreneurship. They advocated improvements, whether in the new foundations they formed for philanthropic purposes, in the creation of the new groups like Capital Investors or Regional Professional Women, their engagement of political leaders and actions, or through innovative partnerships with educators. They were also a more diverse group—more women, races and nationalities represented at the table than in the past. They formed working groups, at times outside of formal channels, to resolve issues and then disbanded as the situation dictated. In this way, the leaders themselves took on all the qualities of the New Economy, acting with speed and efficiency, free of rigid boundaries, and recognizing the importance of key people with the right skills to get the job done.

The marvel is not only the booming growth that the New Economy has spawned, but also the quality of leadership that has brought us to where we are in 2005.

PART III. Conclusion and Call to Action

The vision I have outlined is, admittedly, optimistic. But it should be. Today in 1999, we understand the opportunities better than we did just a few years back. A rapid succession of events over the past 12 to 18 months, among them WorldCom's acquisition of MCI, AOL's buyout of Netscape and the Washington Post's front page series portraying the region as the "Digital Capital" of the New Economy, confirmed that this is a region of enviable potential.

Recognition is one thing. Fulfilling a vision, however, is quite another, and in that regard there is much we can do, as the leaders in the earlier scenario I outlined recognized.

If we fail to tackle these problems, we risk losing our greatest resource: people—the very asset that can make us the Digital Capital of the New Economy. And these people are free to move to other burgeoning centers or rural areas that would only be too happy to accommodate them.

So what do we do? I propose a five-point call to action.

1. Become Advocates for the New Economy.
We must define and communicate the importance of the New Economy to enable people to understand why a digital infrastructure, digital products and a futuristic outlook are critical. We must coalesce all of our organizations around a single image and message. We can do this by organizing a "get digital" campaign.

2. Bring Elected Officials and Public Policy into the New Economy.
With a few notable exceptions, most of our elected officials have yet to be brought into the digital age. We need to convince them to move beyond symbolic actions, to act on substantive investments in strategic areas such as infrastructure, digital government, basic research and professional development within our educational systems. We must work with and bolster our legislators to ensure they understand and enact legislation that supports the New Economy and the entrepreneurship that drives it, and hold them accountable for these outcomes. Most of all, we must commit ourselves, as civic leaders, to this action.

3. Make Regionalism a Core Principle of Every Leader, Business and Organization in the Region.
The Greater Washington region will best succeed by recognizing that the whole region—what was once proposed as the State of Potomac—is far greater than the sum of the parts of Northern Virginia, Maryland and the District. Although some organizations have long advocated regionalism, others remain opposed to such a vision. The New Economy is not about existing jurisdictions and boundaries. We must come together.

4. Advance the Potomac Network.
In his keynote, Steve Case urged us "to work together in an unprecedented regional collaboration to create a greater community." As one who has invested time and resources trying to overcome barriers to regional collaboration, I echo his call to recruit "civic leaders who tear down the walls." We must communicate more openly and frequently, team up on initiatives more often and generate a broader awareness of existing efforts that require substantial commitment of resources or interest. We must do more to bring together the various regional groups, reach across industry clusters and widen the circle of leaders to promote civic leadership and public policy engagement. That is the purpose of the Potomac Network.

5. Define a New Economy Charter.
We must define the bold actions needed to create the connected community of the 21 st century that others will emulate. We must do all we can to fuel our key industry clusters and solidify our position in a competitive and rapidly changing world. This alone, however, will not be enough. Our charter must go further to ensure that all people have the chance to contribute to and benefit from the New Economy. The charter must be driven by civic leaders who are prepared to "tear down the walls," with a commitment to inclusiveness. And, it demands that we be prepared to invest in and support its platform.

Four years ago, I delivered a speech to about 100 business leaders on what we now call the New Economy. A few of you here today were there at that time. I spoke of economic and social change, propelled by the Internet, and described how our region possessed the resources and attributes to be a leading port of commerce in the 21 st century. Many were taken aback by my enthusiasm and conviction, but few were ready to break the apathy that has long inhibited systemic change in this region.

Today, the setting is different. You have heard a chorus of voices speak of the New Economy and its importance to the region. This time, the words came from luminaries like Steve Case and Mary Meeker and a compelling group of business leaders. Five years ago, the potential for gain or loss was not apparent enough to drive substantive action. Now it is. We have a remarkable opportunity—one that is so good, so rich, so exciting, that it is difficult to fully comprehend. We are blessed with a future that other regions envy.

  • We are home to the exploding InfoComm and bioscience sectors that are the backbone of the New Economy.

  • We possess a vibrant, growing entrepreneurial community.

  • We have both the physical and virtual gateways to support the New Economy—three world-class airports and the Internet exchanges through which over 50 percent of all Internet traffic flow.

  • We possess the world's largest and richest repositories of information and cultural objects and an enormous talent base to exploit these resources.

  • We have the presence of the federal government, its agencies and labs and an international community of global institutions, foreign missions and embassies.

  • We have a multicultural population and spectacular cultural, historic and natural resources, including world-class attractions, rivers, mountains and parks that enhance our quality of life.

The Greater Washington region is unlike any other region in the world, different from Silicon Valley, Austin, Singapore, Boston, Bangalore or Seattle. We are the capital of the United States and, with our unique assets, we can and should be the Digital Capital of the New Economy.

But, our vision will only be complete when we use our new-found wealth, talent and technologies to solve the vexing social problems that have longed plagued our region. It is then that we will have written our own proud page in the history books.

This is why we must become engaged in our community. Investing in the future of our region is an investment in your own future as well as that of your business, your children and their children. We must believe in ourselves and in this region. Let us be truly civic leaders, leaders who can and will make this vision a reality by 2005.

Thank you.

Special thanks to the many people from a wide range of backgrounds whose insights and suggestions helped shape and refine this vision for 2005.

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