New Skills, Business Bring New Hope to D.C. Complex
Computer Training Puts Residents in ChargeBy Susan Levine
Washington Post Staff Writer
Monday, June 17 1996; Page A01
The Washington Post
The business started less than a year ago, and so, of course, most everything in the modest office of Edgewood Technology Services Inc. looks new: the eight Compaq computers, nine black and faux-wood desks, cabinets, printers and other accouterments that define many small companies.
It takes only one step out ETS's front door, though, to realize how different this company is. The door opens onto the long, drab, ground-floor hallway of a Northeast Washington apartment building, part of a subsidized housing complex where drug dealing, shootings, even slayings are not uncommon.
The nine employees of ETS know the dangers of the neighborhood because, for nearly all of them, this place is home. One woman has lived at the complex on welfare, another on food stamps. Others have worked -- as a nightclub bouncer, a cook-cashier, a part-timer at the nearby Safeway.
But now, after crash courses in computer operations and entrepreneurship, they find themselves running a business. Once-marginal futures suddenly hold the promise of careers in data processing.
"I have proven something to myself," said Jacques Johnson, 23. "What we're doing is real, a real business. It's not a game."
The arrival of high-technology jobs there is not happenstance but the result of an unusual partnership between a downtown Washington investment firm and a California entertainment company. They have risked more than $1 million on the idea that the personal computer is to the global economy what the drill press was to the industrial giants of the mid-century -- a sophisticated tool that has become simple enough for many semiskilled workers to operate.
The strategy is simple: Go into an inner-city neighborhood, intensively train a group of people, then harness their new skills to provide high-quality data management at low prices. The added twist? Give the new workers a personal financial stake through stock ownership.
ETS employee Sirletha Gaither is passionate when she explains why she is sure it will succeed. "Because we're hungry -- for power, for a chance to have things everyone else takes for granted," she said.
The question is whether this enterprise can be profitable long-term and replicated nationwide, as ETS's backers intend to do. Company officials know that the proof will be in the contracts won from government or private businesses. Although they won't open their books, they say that on the strength of their first and only client -- the firm that created ETS -- the new company is almost breaking even, with monthly sales of $30,000 to $50,000. Most employees receive about $20,000 a year, plus benefits, for creating increasingly complex databases and spreadsheets.
The thinking behind ETS defies deeply entrenched stereotypes about the people who live in the country's most distressed communities and just how economically competitive they can become.
Paul C. Brophy, a Columbia consultant who has led local and national community development programs, puts great stock in ETS's approach. With the nation debating how to end welfare dependency, it couldn't be more timely. "I think they're on to something," he said. "Not only does it create jobs, it creates a sense of ownership and entrepreneurship, which I think is so critical."
Equally critical is the technology to link Edgewood Terrace -- or any other economically depressed area -- to the world. Ten years ago, it didn't exist. Today, computer networks allow people to work from anywhere. According to Russell T. Davis and C. Austin Fitts, that means an opportunity to develop jobs in neighborhoods where government programs long have failed to stem urban decline.
The two are the founders of Hamilton Securities Group Inc., the Dupont Circle company that is a principal supporter of ETS. The firm's main business is advising government agencies and private companies on real estate portfolios, especially those with properties in low-income areas. Since the company's formation in 1991, clients have included the Resolution Trust Corp. and New York's Battery Park City Authority, for which Hamilton helped restructure nearly $1 billion in debt.
Both Davis, 36, and Fitts, 45, are former Wall Street bankers who were top officials in the Department of Housing and Urban Development during the Bush administration. They're known for unconventional thinking.
In New York in the early 1980s, they helped structure a $5.8 billion project for the regional transit agency that got headlines because of the favorable bond rating it secured so soon after the city's fiscal crisis. Several years later, while Fitts was the nation's federal housing commissioner, she drew attention for proposing government fire sales of excess foreclosed properties.
Their philosophy remains a blend of bottom-line capitalism and '60s idealism. Yet they say Hamilton's interest in ETS is not rooted in altruism. "We are doing this to make money," Davis said. "This is not a charity."
The specifics have evolved over the last year. ETS is the pilot subsidiary of a corporation called e.villages -- for "electronic villages" -- which Hamilton formed with Adelson Entertainment, a Los Angeles-based film and television producer. By 2001, they hope to establish as many as 75 similar operations around inner-city housing complexes nationwide. Adelson also is motivated by profit: It's designing a multimedia training program that will be used at each site, as well as sold independently.
Under the plan being finalized this summer, employees will be offered stock ownership -- and the potential profits and risks -- in e.villages. In turn, the parent company will pursue major contracts and capital investment and provide centralized marketing and administration for ETS.
"I'm intrigued," said Whitney Tilson, executive director of the Initiative for a Competitive Inner City. The New York City group was launched two years ago from research conducted at the Harvard business school. "What they're doing is very consistent with what we espouse -- a genuine profit-making venture, linkages with the corporate sector."
There are concerns, though. Leslie Steen leads a nonprofit organization that has bought Edgewood Terrace's worst units and plans to rehabilitate them and offer community services. She embraces the e.villages philosophy -- she already has seen residents' lives richly transformed -- but she questions how competitive ETS truly will be.
"It's hard to judge it right now," Steen said. "A lot of money's being invested. No small business would ever be able to stand that load of debt."
At Edgewood Terrace, the cream-colored high-rise that houses ETS's windowless office is well maintained and still held by the Bethesda developer who built it in the early 1970s. Not so the neighboring buildings. Seven were run for more than a decade by out-of-state owners before HUD foreclosed last year. Neglect and abuse left ugly scars. An elevated parking deck that collapsed still is a wreck.
Gaither moved to the complex from Montgomery County in 1993 to care for a disabled aunt. Sadness more than bitterness attends her sacrifice; the 38-year-old woman and her two teenagers really didn't leave much behind. "I've had lots of jobs," she said. "I've lost a lot. Some of my own fault. Some not my own."
When e.villages's flier went up last year announcing that a free computer class would be offered, Gaither was ready to beg her way in. Lisa Thomas, however, expected little beyond basic keyboard lessons. "What are they going to give you for free?" she said she wondered.
Thomas applied despite her doubts. "I didn't really feel like I had a wide variety of career choices," she said. The mother of three recently turned 31, but her thin frame, soft voice and thick glasses make her seem younger. It's hard to imagine her as a bouncer, which she was last year. She talks about her attitude then: "ghetto-ish."
"I didn't dress the part of a working person," she said. "I didn't have anywhere to go."
The training began in May 1995, moving quickly from Microsoft Word to the Access software that manages extensive data files. About halfway through came a vague promise of jobs. As graduation neared, Fitts and Davis suggested to the seven students that they form their own company through e.villages. Hamilton Securities would hire it immediately.
Flabbergasted, everyone waited for the catch. None ever came.
Still, the limitations of only 10 weeks of computer instruction, of employees' inexperience in business and lack of social know-how, have taken months to overcome. Few could read a budget, much less devise one. In conversation or demeanor, few were equipped to deal professionally with clients.
"It's been fraught with challenges on a daily basis," said Yvonne Craver, a former Price Waterhouse senior manager and CPA who is e.villages's chief operating officer. The result has been constant on-the-job learning. Craver and site manager Marvin Harris, a 20-year computer programmer, even mediated arguments over ETS hiring a coffee or cleaning service. "They said it was too expensive, it affects their bottom line," she said.
Sometimes data processing has been the easier task. Employees organized Hamilton's massive phone directory. They built a spreadsheet of 19,000 multifamily dwellings and mapped federally insured properties in dozens of cities.
"I would be pleased to be a reference for them," HUD Assistant Secretary for Housing Nicolas P. Retsinas said of ETS, which prepared material for Hamilton before a HUD mortgage sale. "It was quality work."
Harris considers a satisfied client the best evidence of ETS's future. "We've cultivated a work force that didn't exist before," he said. "If we're going to save any portion of the inner city, operations like this have to exist."
The next hurdle is to attract clients on the open market. ETS thinks it is ready, and as word gets around, other communities already have called e.villages about future data-servicing sites, Craver said.
Employee Wanda Riddick, 34, a dropout now aiming for her high school equivalency certificate, is well aware of what has happened. "We've been given a big break," she said. "We could not go out with the little training we have and get what Hamilton has given us. We'd be fools to think that."
Riddick is no fool. She just never realized she had such a mind for spreadsheets, for business. From her corner desk at ETS, she reviews the company phone bill, monitors payroll. Every dollar counts.
She now risks dreams for herself and her three children, the oldest of whom often pops in after school. After eight years at Edgewood Terrace, Riddick wants a house with a back yard. ETS, she said, can make that possible.
She looks back on her nothing-to-lose leap into computers "and it makes me proud of me. It let's me know I can accomplish just about anything I want to do."