Power, Meet Money

Power, Meet Money

Power, Meet Money

Printed.
Jan. 21 2000 9:30 PM

Power, Meet Money

Why the Washington establishment ignored AOL.

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{{Slate's Political Roundup#73099}}

The first time I saw AOL boss Steve Case was at the 1998 White House Correspondents Dinner, the annual sniff-and-scratch status party for D.C. media. Case was standing on the patio sipping a drink when a mob of reporters bull-rushed past him and descended on Paula Jones. Case watched this spectacle, expressionless. The moment crystalized the (non)relationship between Old Establishment Washington and New Washington: My indifference is greater than yours.

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At this spring's correspondents dinner, reporters will be swarming around Case. In buying Time Warner, Case has made himself the biggest media mogul D.C. has known. A Case deputy, Ted Leonsis, has become a local celebrity by purchasing the Washington Capitals hockey team. Leonsis and his two self-made zillionaire business partners will soon own the NBA's Washington Wizards as well. (Leonsis recruited Michael Jordan to run the Wizards.) Daniel Snyder, another new money tyro, just bought the city's most precious institution, the Washington Redskins. And D.C. has suddenly noticed that a 34-year-old named Michael Saylor has made more than $2 billion running a tech company called MicroStrategy.

These are just a handful of the thousands of people old Washington has never noticed, who live in Virginia exurbs old Washington could not find on a map (Herndon? Sterling? Merrifield?), who work for businesses old Washington cannot understand ("data mining"?), and who have made enough money to do whatever they want (which seems not to include socializing in or with Georgetown). D.C.'s elite of politicians, lawyers, lobbyists, and journalists has woken up and realized—half-thrilled, half-horrified—that it is no longer the center of Washington.

Until a year or so ago, Old Washington and New Washington (which isn't even Washington, it's Northern Virginia) shared nothing but mutual disregard. Tech companies have been congregating in Northern Virginia (and, to a lesser extent, suburban Maryland) for three decades. Most were defense contractors--quiet, bureaucratic firms that churned punch cards for the Pentagon and had no social cachet. Telecom and satellite firms such as MCI set up in D.C. in the '70s and '80s. They were mostly lawyers who came to the capital to be near regulators. No one noticed as they wove seamlessly into the city's lawyer-lobbyist fabric. The Internet companies that have emerged in the past five years are different: They are run by entrepreneurs, not lawyers, and they aren't near D.C. because they need the blessings of the government.

The Washington Post established D.C.'s attitudes toward the new suburban techies. It didn't notice them. AOL did not make the Post's front page until 1995 and made it only infrequently until 1998. "The Reliable Source," the Post's gossip column, mentioned AOL only once before July 1999—a 1998 item about Case's wedding. Insofar as the Post did notice, it was usually to point out AOL's (very real) business problems: a plunging stock price, irritated customers, "harsh economic realities." The Post passed on chances to invest in AOL in 1993, 1994, and 1995, Leonsis told me with relish.

David Plotz David Plotz

David Plotz is the CEO of Atlas Obscura and host of the Slate Political Gabfest.

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Kara Swisher, who covered AOL for the Post in the mid-'90s and wrote the definitive book about the company, aol.com, says the Post was "anti-AOL" because the paper fixated on national politics. "All they cared about was who was going to be the Department of the Interior's undersecretary for trees. Meanwhile, 20 miles away, these guys are becoming billionaires and affecting average citizens more than any of these political people ever will."

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T he rest of elite D.C. followed the Post's lead. Washington is a salary town, not an equity one. Elite Washingtonians can earn a lot—lawyers and lobbyists clear $1 million or more a year—but don't amass huge fortunes. "Money has never been any criterion for success in Washington, because power is the criterion," says Sally Quinn, the authority on establishment D.C.'s sociology. Rich folks who have Washington cachet, such as former Treasury Secretary Robert Rubin, acquire it by virtue of their power, not their wealth. Homegrown fortunes have never impressed the establishment. Real-estate moguls, the only folks who made real money in D.C. until recently, were shut out of power Washington—except for sports team owners Jack Kent Cooke and Abe Pollin.

Establishment Washington also overlooked the nerd millionaires because the cultural clues are all different. In Washington, important people of both sexes still wear dark suits of conservative cut. In cyberland, you can't tell a senior vice president from a janitor, at least not by his clothing. Nor is Washington charmed by the preening quirkiness of the tech culture. "We were weird. We had guys putting up chandeliers in their offices or lifting weights or watching General Hospital. This was not the D.C. model," says Mario Morino, the founder of Legent and godfather of the Virginia technology industry.

The Virginians reciprocated Washington's indifference. Most of the hot new companies are outside the Beltway, 20 miles or more from the White House. The techies labor like dogs on their suburban campuses, live near work, and spend what social time they have with each other. They couldn't be less interested in Capitol Hill's machinations. They buy boats, play the stock market, fiddle with software and gadgets. They buy mansions in Great Falls and Reston, not townhouses in Kalorama, and rarely go into the city. "They are Internet citizens. They could be 20 miles from Washington or 2,000 miles," says Gary Arlen, who runs a local technology-research firm. They are here almost by accident. AOL is in Virginia because founder Jim Kimsey is a Washingtonian, and he resisted efforts to relocate the company to Silicon Valley.

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Most of the tech executives are uninterested in politics (though Case is an exception). "They don't see a need for Washington. They can't imagine being a part of it. It is slow-moving. There is compromise. It does not involve the purity of starting a company," says Bill Regardie, editor of the Washington business magazine Regardie's Power.

But in the last year, the two elites have finally realized they need each other. Most of the rapprochement is coming from the Washington establishment, which now understands that the Northern Virginians have ungodly amounts of money, energy, and even glamour. D.C. is succumbing to the money and nerd fascination that has captured the rest of the country. The Post is pouring resources into tech coverage. Scarcely a day passes without a front-pager on AOL or another local Netrepreneur made good. When AOL and Time Warner merged, the entire business staff and much of the "Style" section dived on the story. The highest-profile millionaires are becoming celebrities. "The Reliable Source" now chronicles Leonsis' exploits as the Caps' owner, Case's party visits, and Saylor's dating habits. The White House packed its millennium party with tech leaders. Nonprofits are courting the new plutocrats in hopes of scoring philanthropic millions.

The tech millionaires, meanwhile, have realized they can use the establishment. Microsoft's disastrous neglect of Washington reminded AOL not to make the same mistake. Case repeatedly says that policy will be more important than technology in shaping his industry, and he is striving to become a D.C. player. He eats dinner with Katharine Graham, socializes with Colin Powell, and even hammed it up with William Bennett at a benefit. Case hired George Vradenburg, a high-powered lobbyist, to represent AOL on the Hill. Vradenburg is showering Congress with attention: He estimates that he has brought 50 House members and senators to the AOL campus for show and tell.

Geek money is wedging into Washington society through sports. Leonsis has been deluged with invitations from old Washington groups since he bought the Capitals. (Invitations he does not have time to accept: "I have a job," he says.) Power Washington is miffed that Snyder doesn't think it is important, but D.C. folks still crave an invitation to sit in his Redskins owner's box. Kimsey is campaigning to bring a baseball team to the area.

Sally Quinn contends that the nerd tycoons can only go so far in Washington. "Money is not what we do here. In Seattle that's what they do. But this is the power capital of the world. No matter how much money you have, power is going to be the main event. It is not like they are going to come in and usurp that."

But perhaps money has never gone very far in Washington because Washington has never really had money. This is the first time D.C. has hosted large, successful businesses. All the Washington establishment folks I spoke to admitted that they were fascinated by Case and his confreres. Money hasn't supplanted power but may have matched it. An ambitious young lawyer hungry for power used to join a big firm, make partner, schmooze senators, and die happy. But these days, Saylor is holding mixers for young D.C. associates and picking them off to work at MicroStrategy with high salaries and stock options. Tech venture capitalist and former Senate candidate Mark Warner says that his politician friends have been imploring him to get their children jobs at hot dot-coms.

"In the '60s and '70s, young people came to Washington because they were idealists and they wanted to change the world," says Warner. "In the '80s they came because they wanted to have power and make a good living as a lobbyist or lawyer. Now they are coming because they want to do an IPO." After all, influence is hard to measure. Equity isn't.