Apple’s Big Bite

The world’s most valuable company made two announcements last week—one that mattered a lot for North Carolina, and one that mattered a lot for the company.

On Monday, Governor Roy Cooper stood on the steps of the executive mansion in Raleigh, flanked by the top leaders in the House and Senate, to deliver the long-awaited news that Apple will spend more than a billion dollars creating a new campus in Research Triangle Park. North Carolina’s entire political class hailed it as a transformational investment, on par with IBM’s decision to anchor RTP back in the 1960s. Apple mentioned it in the fifth paragraph of a press release.

Two days later, the company announced that it made $23.6 billion in profit during the second fiscal quarter alone and boosted stock buybacks by $90 billion. Apple CEO Tim Cook handled that announcement personally.

This is the world economic developers face now, where the power imbalance between global firms and state governments is so vast that a front-page-news investment for North Carolina is a fiscal footnote for the company. And state taxpayers are expected to do their part for future earnings. In the largest incentive deal in state history, Apple will get $846 million in tax breaks over the next few decades, assuming it delivers on the 3,000 jobs promised for the Triangle.

“The size of the incentive package is pretty startling,” said Henry McKoy, a former Department of Commerce official who now serves as director of entrepreneurship at N.C. Central’s business school. “These corporations know they can talk about being in a few different places, and that will drive up the amount folks are willing to invest in them.”

Indeed, Commerce Department officials crowed about beating Ohio for the honor of the Apple campus, claiming a measure of redemption after being publicly jilted in favor of Austin, Texas, for Apple’s last round of expansion in 2018. “The states just kind of go into all-out war mode, and it becomes partly psychological,” McKoy said. “I think the idea is that there’s a psychological edge when a very big corporation chooses your state.”

He pointed to the frenzied race by lawmakers a few years ago to sweeten corporate incentives after Amazon announced plans for a “second headquarters” to complement its home base in Seattle. Despite amending the state’s Job Development Investment Grant specifically to accommodate Amazon’s project, North Carolina lost out to northern Virginia for HQ2. “It’s certainly frustrating to think about the idea of bidding wars between communities,” McKoy said.

It’s even more maddening when you consider who actually benefits from these corporate recruiting drives. Raleigh, Austin, and Arlington, Virginia, are some of the best-educated, fastest-growing cities in the country. Crawling traffic and runaway home prices are among the more vexing challenges in all of those places. In coming to the Triangle, Apple is not changing the fortunes of some economically forgotten corner of America. It’s claiming a patch of land next to Cisco Systems, Lenovo, and Biogen.

That’s where the Ph.D.s are, and Apple needs them. The company is looking for computer scientists who can build machine learning algorithms and offer “a theoretical understanding of computer vision methods.” Those people are not easy to find, but the Triangle has a larger-than-average concentration of them, because we have a larger-than-average number of excellent universities, most of them built through generations of public investment. RTP’s recruiting materials focus on doctoral degrees and research spending more than tax rates and Commerce Department giveaways.

Still, state leaders saw what they wanted to see in the Apple announcement. Governor Cooper mentioned diversity and inclusion a number of times in his remarks, suggesting that Apple bypassed North Carolina in 2018 because of the lingering stink of House Bill 2: the infamous bathroom bill that prompted major companies and sports leagues to skip the state while our leaders worked out their differences over where transgender people should use the restroom. Governor Cooper assured the assembled reporters last week that Apple CEO Tim Cook, who earned his MBA from Duke and has spoken out publicly in support of gay rights, “feels good about our diversity and inclusion and anti-discrimination landscape.”

Senate leader Phil Berger, meanwhile, touted the accomplishments of a business-friendly legislature, which has chopped the corporate tax rate from 6.9 percent down to 2.5 percent during his tenure at the helm. “We’ve spent 10 years enacting a responsible budget, lowering taxes, and making regulations reasonable,” he said. “The winning formula for job creation.”

All around, it is a fine example of how politicians try to draft major companies onto their side of political issues when it’s convenient (while decrying their influence when it’s inconvenient). But the less-noticed piece of Apple’s North Carolina announcement serves as a reminder that gargantuan firms aren’t partners in economic development. They’re businesses, first and last, riding and reinforcing the same economic trends that are making states like ours harder to govern.

In addition to bringing 3,000 jobs to western Wake County, paying an eye-popping average salary of $185,000, Apple is expanding its iCloud data center in Maiden, North Carolina. The company will spend another half-billion dollars to grow the enormous collection of routers, switches, and file servers that already occupies 181 acres of Catawba County, and is now set to cover another 215.

That investment will add some real money to Maiden’s coffers, but it won’t do much for employment. “These data centers don’t tend to create a whole lot of jobs,” McKoy said. “People come in and check on them and keep them running, but that’s about it.” The entire Maiden facility, which is one of the world’s largest, employs about 400 people. “You find someplace where you have a lot of land and not a lot of neighbors,” McKoy said.

Amy McCauley, communications and marketing director for Catawba County, pointed out that Apple makes a huge contribution to local coffers—more than 6 percent of the county tax base—and has spurred investments in water and renewable energy that may help attract other data centers. “The infrastructure that made us a great site for the furniture and textile industries makes us a great site for data centers,” McCauley wrote in an email. “Catawba County can support the land, power, and infrastructure requirements that a large facility like Apple’s needs in our community.”

“Cloud computing” needs all that land and power because it’s actually just regular computing, happening somewhere else on a grand scale. All of those innovation-economy jobs in Charlotte and the Triangle, which seem to take place entirely on a screen, still require giant, fenced-off buildings with lots of energy and water and land. Your iPhone backups don’t live in a cloud. They live in places like Maiden, just across the highway from a lumber yard and a rock quarry.

As the tech giants build our automated new world, the Triangle gets the high-dollar jobs while rural North Carolina gets the high-dollar machines. Google’s new engineering hub will be in Durham; its data center is in Caldwell County. Facebook has a big data center in Forest City; it has no plans to build an office there.

This isn’t a knock on data-center work. They’re high-skilled, well-paid jobs. The Catawba County government website features a great story about Michael Duncan, a data center engineer who lives in Newton. After dropping out of high school and reaching a dead end working at a steakhouse chain, he was able to go back to school through a Workforce Investment Act program at Catawba Valley Community College. He excelled, transferred to UNC Charlotte, and emerged with a degree in electrical and computer engineering. “Since that was the first opportunity I had ever had to go to college, I tried to do the best I could,” Duncan recounts. “I continued down that road because I love computers and everything about them. It was easy for me except, of course, the math.”

Duncan’s story is heartening, but much too rare. At 53 percent, Wake County has one of the higher bachelor’s degree attainment rates in the country, on par with places like San Francisco and Austin and Washington, D.C. In Catawba County, it’s 22 percent, lagging the statewide average of 31 percent. Apple’s presence in the state isn’t going to fix that discrepancy. It simply deepens the trend.

My dear friend Leslie Boney, who worked in economic development at the UNC System and now runs the Institute for Emerging Issues at N.C. State University, used to have a series of black-and-white photos on his office wall. At the top was the image of a lively auction in a tobacco barn. Below that was a sun-wrinkled farmer standing at an assembly line, training for a new manufacturing job. Then, finally, there was a mournful shot of a padlocked factory gate. The photos told the story of rural North Carolina over the last few generations, of the move from fields to factories to … whatever comes after a padlocked gate.

“Maiden, North Carolina, may not be mentioned in the tourist’s guide book, but it is on the textile map,” reported Mill News. The Great Southern Weekly for Textile Workers in 1920. “The Carolina Cotton Mills … represent home capital, built and operated under the management of some enterprising business men of the county.” The mills employed most of the town. They built houses and sports leagues and swimming pools. And the managers lived in Catawba County. Maiden was the corporate headquarters of Carolina Cotton Mills and still hosts the main office of its much-diminished successor company.

Global trade and accelerating automation put an end to the broad-employment model of places like Carolina Cotton, an end to the era of bustling mill towns where a worker without a college degree could earn enough to support a family. Without over-romanticizing mill work—nobody has lost a limb in a data center, far as I know—it’s fair to ask whether our current model of corporate recruitment is focused on the right problem. I’m glad Apple is coming, glad for what it says about my home state and our two centuries of progress from Rip Van Winkle poverty to fast-growing tech hub.

But the real challenge for economic development in North Carolina isn’t creating ever-better choices for software developers in Cary. It’s making sure that the next Michael Duncan, the young man who realizes a steakhouse late shift isn’t going to support a family, has a real shot at going back to school or working for a company willing to hire, train, and pay the two-thirds of North Carolinians without a college degree. If history is any guide, that won’t come from out-of-state corporate saviors. It’ll come from the patient investment of “home capital,” from “enterprising business men [and women] of the county” who build something new.