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Higher education and West Virginia’s future

West Virginia Chamber's 81st annual meeting and business summit
Prepared remarks by E. Gordon Gee
August 31, 2017

Thank you, T. J. Obrokta. It is a privilege to be with you this morning to talk about the most important task facing us: Advancing our state into prosperity.

Our state’s current position makes this task an urgent obligation. But for me, as well as for you, it is more than that — it is a passion. We all want to continue to move our State forward as quickly as possible. I know that everyone is pleased with our recent progress but no one is satisfied with where we are. And our quest for the promised land will leave us wandering in the desert unless we pause from time to time to confirm our direction.

That means asking ourselves some questions: What does prosperity mean? What changes should we make? How do we move forward?

Over the past few months, I traveled the roads of West Virginia, as I do every summer on my County Tours. But this year we spent time having Community Conversations about the issues that matter most to West Virginians. We gathered feedback, and I would like to share some of what we heard in this brief video.   

As you can see, no matter who we are, where we live or what we do each day, West Virginians share one unwavering quality: We love West Virginia. Having lived around the country, I can testify that no state inspires love and loyalty like West Virginia.     

The people who dwell among these magnificent hills and hollows deserve lives as soaring and strong as our landscape. They deserve the economic security, stellar education and first-rate healthcare that would allow them to approach life’s starting line on even footing with all Americans.   

But, at this moment, many of them lack those essentials. And I believe there are three reasons why that is so.  

First, our state suffers from what I have called negative elitism. We cannot understand why anyone would want to work or live here. Instead of supporting success, we are all-too-ready to tear it down. Any psychologist will tell you that a child growing up with ridicule and shame will start to live down to that poor self-image.    

Likewise, we in West Virginia have believed our own bad press for so long that we have manifested degrading headlines into a reality that begets only more negative press. I ask the leadership in this room to join me in changing that conversation.    

We have a great story to tell.  We have talented people and valuable assets.  It is time we start telling our story to the world.   

Second, we lack intestinal fortitude. Deciding to change is difficult. Moving in a new direction might upset the apple cart, and we fear losing or bruising any apples.   

But fretting over a dwindling harvest makes it impossible to plant new seeds. If we want to transform this state – if we want to lead rather than trail among our peers – we must nurture fresh opportunities, and prune the dead wood restricting our growth.   

Our third obstacle has been the unwillingness to try for fear of failure. I am not a fan of drafting verbose strategic plans that end up in binders lining dusty shelves. I am a fan of creating strategies that turn into immediate actions. Some such strategies succeed. Some fail. But failure is not as perilous as inaction. As someone who has made mistakes in my own life, I can attest that failure produces learning, adaptation and strength. Inaction only produces inertia.   

As Franklin D. Roosevelt urged in the bleak atmosphere of 1932: “Above all, try something.”     

And so we are.   

This year, West Virginia University partnered with the State Department of Commerce and Marshall University to commission the McKinsey & Company in a search for a fresh look at our problems and pathways to solving them. Only private dollars, rather than state appropriations, funded this effort.   

We asked them to consult local and regional community leaders who are working diligently to support economic recovery and growth, such as the Chamber, the National Guard, Vision Shared, Imagine, the Business Roundtable, Tech Connect, and Discover the Real West Virginia Foundation.   

Together, we have blazed a path that we call West Virginia Forward. And this path has three objectives.   

First, we need to reinforce the foundation that supports economic growth, including our infrastructure, talent base and business climate. 

The second objective is to identify potential sectors in which West Virginia can grow to diversify our economy.     

And, finally, we must draw a clear roadmap, helping partners around the state navigate these new pathways toward our shared destination: A prosperous West Virginia.    

In outlining this way forward, McKinsey avoided redundancy by building upon existing findings and knowledge, while providing original insight. The work grew from a fact-based process uniting expertise from around the world with deep awareness of West Virginia’s unique identity.         

Interviews with industry leaders, as well as with state partners, identified areas of strength and opportunity for future growth.   

A working group met weekly to align their thinking on the most optimistic solutions for West Virginia.   

They shared their key decisions with a steering committee comprising senior leadership and major initiative donors.  

Five guiding principles anchored the entire process:       
  1. We must build on existing assets. What can we enhance to compete more effectively with our peers?    
  2. We must grow and diversify beyond the sectors already established. What can we do to grow the state more rapidly, and what industries have projected growth both in state and nationally?    
  3. We must find disruptive trends, the kind that, according to Forbes, “displace an existing market, industry, or technology and produce something new and more efficient and worthwhile.” Within our priorities, where can we find market-changing innovations?     
  4. We must consider our regional impact. What priorities will have the greatest influence on our region
  5. We must find the quick wins. What can we launch to produce the greatest gains within the next year?    
These simple principles led us to discoveries that I believe will change the future of West Virginia. Though not exhaustive, I want to share a few key ideas I find to be exciting and promising.         

West Virginia has many robust industries that we can grow such as aerospace maintenance, automotive parts manufacturing and metals manufacturing. And of course we will continue to support efforts to support our rebounding coal industry.

The State also has sectors that are growing more slowly here than nationally, but where we can succeed is by differentiating ourselves from the competition. One area is downstream oil and gas manufacturing, specifically in carbon-fiber-reinforced plastics and fine chemicals.   

New sectors the State can capture that promise high growth are cybersecurity, cloud services and data centers, and higher-end tourism.   

And two areas that create distinct opportunities in West Virginia are the life sciences and automotive assembly.   

So, let us break down a few of these ideas.   

We are already working toward the storage hub and forging ahead on the infrastructure that will open shale to downstream jobs that use natural gas. Indeed, I want to commend Secretary Thrasher and many in this room for their efforts to make the storage hub a reality.    

Our Energy Institute is proudly part of that effort.   

With those efforts underway, we asked what we should focus upon now to maximize downstream opportunities.   

Fine chemicals was the answer. West Virginia has three major assets in this area.   

First, our existing footprint in chemicals and plastics manufacturing offers opportunities for co-location of manufacturers.   

Second, there is potential for local downstream buyers in the State, such as Procter & Gamble.       

And last, the low-cost access to natural gas that our state can provide companies will become more attractive as storage and pipelines open to market.   

The next step is to attract manufacturers of compounds directly downstream from existing production that would benefit from lower costs of input with greater profit margins.   

Another obvious target for development is tourism. We have a beautiful state with tremendous opportunities for visitors to discover and explore.       

However, what we learned is that the average vacationing family stays four days in one location and spends $500 while there. In West Virginia, tourists stay just two days and spend only $125.   

We also know from our data that older tourists with higher incomes tend to spend more on travel. Within a three- to four-hour drive from our state, large populations of older and higher-income people offer a fruitful target for tourism marketing.   

Tourism is not a one-size-fits-all proposition in our small but varied state.     

Instead, each region has unique advantages we can leverage to attract visitors. For example, in the New River Valley and Hatfield-McCoy Mountain tourism region, we can draw wealthier and older adventure travelers with higher-end hotels, a large family adventure resort, ATV tourism and cooperative development of trip packages that encourage more spending.   

In Eastern West Virginia, we can expand existing clusters of second homes, especially in the Potomac Highlands. With effective marketing and tailored offerings to likely buyers, we can expand our second-home footprint long-term.   

Third, we can attract high-income retirees to northern West Virginia by developing luxury assets in proximity to their critical needs, such as quality healthcare centers.   

However, to make any of these moves we need to create a business climate that allows for prosperity. We heard yesterday that efforts during recent years have improved our reputation as a business-friendly location.   

Changes made recently and, in fact, over the past fifteen years – such as workers compensation privatization, tax reform, and civil justice reform have helped West Virginia become among the most competitive 15 states in the cost of doing business.      

These are the facts.  

Your efforts in working with our elected officials to change our beloved State are paying off.   

But this is where our habit of humility has hurt us: No one knows. We need to raise awareness of these changes so that businesses appreciate what we offer.  

And while we have made strides to improve our business climate – more work must be done. West Virginia is one of only seven states that still taxes business inventory as part of tangible personal property. We also tax inventory and machinery while neighboring states, such as Ohio and Pennsylvania, do not. 

Now I know that the inventory tax benefits our local governments and school systems and we cannot – I repeat cannot – harm our communities and our schools.  We must invest in them.   But we can solve this issue if we take the politics out and focus on solutions.   

We need to simplify our administrative processes for prospective companies.   

While our energy costs are competitive with those in other states, we have lost ground over the past decade in industrial electricity costs, and we must carefully determine why this is and what we can do about it. We will not reach our greatest potential in expanding our manufacturing base if we do not address this issue.  

Finally, we all love our State.  We love its beauty.  But when using the metrics through which the outside world judges – the quality of life in West Virginia has been comparatively lower than other states. This limits our ability to attract talent. We need to work with partners across the state to improve housing availability, road conditions, access to broadband, access to clean water and the health of our citizens.   

We must also turn our attention to creating incentives for innovation and business development. By improving the role of the economic development office and empowering it to create an attraction strategy, we can reap a larger share of foreign investment.   

To nurture a business-friendly environment, we should consider creating a one-stop shop that aligns current resources with business needs and directs businesses to the right offices for help. Through partnerships between the Department of Commerce and local universities, we can provide support to small businesses such as legal advice and financial forecasting.       

And we all know that the State’s infrastructure poses challenges. We must improve roads and bridges, increase broadband access and develop a landscape where data centers can thrive. Compared to the neighboring states of Ohio, Virginia and Pennsylvania, our State has fewer sites for prospective companies because we have no site certification and remediation program at the ready.   

Perhaps our biggest opportunity is also what I have always described as our biggest asset: our people.   However, circumstances such as a mismatch between labor supply and demand, the opioid crisis and large waves of out-migration have left that asset in short supply.   

I know this to be certain: If we can create jobs and the space where businesses can thrive, West Virginians will come home. I cannot count the number of West Virginians I have met who would love nothing more than to return to their native state. We must work together to bring them home.   

We can do this by building our future talent pool, especially in STEM areas, and expanding vocational training. We need to improve the health and skill of our existing workforce to attract employers, and we need to engage our universities’ alumni to reach out to the talent we have lost.   

So, these are heady thoughts – but they are also attainable – if we move quickly from thought to deed.   

Our next steps include asking each stakeholder to undertake projects to solve these problems and implement these recommendations. For example, the State will work to attract anchor companies in cybersecurity, while other partners invest in cybersecurity talent and creating the environment where cybersecurity businesses can succeed.   

At West Virginia University, I commit that we will focus on innovation and research, local business support, talent expansion and alumni outreach.   

And with our partners, the Commerce Department and Marshall University, we are in the final stages of executing a Memorandum of Understanding that formalizes the partnership through commitments from each, outlining specific actions and dedicating resources. 

These are challenging times, but they are also exciting times for West Virginia.   

By building on the assets we have, creating new opportunities for potential businesses and investing in our people, we can move from a state of despair to a state of prosperity. 

Looking forward requires our unwavering focus. It demands courage. And, as West Virginians know, it entails making sacrifices and hard choices. 

State budget shortfalls have triggered cuts in many areas. The Legislature has reduced state support at our University alone by more than $38 million in the last four years. So far, we have been able to absorb these reductions while maintaining our educational quality by making tough choices and emphasizing our core mission to advance education, healthcare and prosperity.         

But reductions merely patch over the problems in our state budget, rather than solving them. 

We cannot cut our way to prosperity. 

We need to enlarge our budget pie, rather than fighting over the size of our servings as the whole thing crumbles.  

Instead of wringing our hands, we need to stack hands. And instead of slapping Band-Aids on our economic wounds, we need to heal them once and for all.     

To do so, we must change our strategy from “cut” to “invest.”   

We must adopt an abundance mentality, rather than one based on scarcity.   

If we do so, we can inspire other states and communities dealing with the same challenges.   

I am grateful for the team from McKinsey who has been a true partner in every sense of the word. I would like to recognize some of the team members here today: Tyler Duvall, Sarah Tucker-Ray and Dany Matar — please stand up to be recognized.   

I look forward to working with our friends in Commerce, Marshall and other groups around the state and with concerned West Virginians like you.   

Our state is crying out for change. But change does not mean shifting funds around or raising our ranks in quality-of-life polls. 

Change means elevating our vision of what is possible.  

It means recognizing our assets and exploring new opportunities for growth.   

Above all, it means abandoning our negative state self-image. 

In this pivotal moment, we must embrace our strengths and tackle our problems in the firm faith that we can make a difference. 

In a time when society seems more fragmented than ever, we are all working toward the same goal.   

With our road map in hand, we can all advance in the same direction.   

With hard work, we can clear new pathways.   

We are not gazing backward.   

We are not freezing in fear.   

With the resilient spirit that typifies Mountaineers, we are moving West Virginia Forward — together.   

And our journey will take us beyond our highest aspirations.   

Let’s Go.