By JOEL KOTKIN
The engine of L.A.'s regional economy is humming once again, but there's a dangerous absence behind the wheel. Once among the most consciously led and promoted spots on earth, Southern California has become a largely headless region with a perennially enfeebled and directionless commercial elite.
In the coming years, this lack of a strong business leadership could prove the region's undoing, particularly as both the national and California economy slows. Other regions and cities Silicon Valley, Raleigh-Durham, Seattle and Houston have developed strong, confident business elites, capable of defining themselves, their communities and their place in the global economy.
But in Southern California, organized labor (particularly public employee unions), radical academics, environmental lobbyists and a largely sympathetic media increasingly sculpt the parameters of politics and policy. The relative weakness of business has been painfully obvious on a host of fronts, from charter reform, to the failure to reform the dysfunctional educational system, to the battle over expansion of the airport.
Earlier in this century, Los Angeles possessed a strong business elite. Although many were unpleasant characters with often equally unpleasant views, these leaders could get things done, as our inheritance of the ports, freeways and water delivery systems bear witness. Steve Gavin, a former assistant to Pacific Mutual Chairman Asa Call, whose "Committee of 25" dominated Los Angeles in the 1950s and early 1960s, contrasted these leaders with today's often weak and timid souls in an interview shortly before his death over a year ago.
"There was a definite order here," Gavin remembered. "You could summon the right people. Everyone knew each other and virtually everyone was male, except, of course, for Mrs. (Dorothy) Chandler."
Reviving such a monolithic group would be out of sync with current demographic and economic realities. Not only is Los Angeles no longer a predominately white Protestant town, but women- and minority-owned firms now constitute close to a majority of all regional business. At the same time, many of the companies most deeply involved in Los Angeles' rapid rise to global prominence the Broadway Stores, Lockheed, Hughes, First Interstate Bank, Security Pacific, Southern California Gas Co., Great Western Savings, Thrifty Drugs, Vons, Hughes Markets and H.F. Ahmanson have disappeared through mergers or moved out of town.
Once an aspiring alternative capital for giant firms, Southern California has become, in the words of one scholar, a veritable "Banana Republic" for large companies. Between 1968 and 1998 the number of Fortune 500 firms in the city of Los Angeles dropped from 12 to seven even though the region experienced enormous growth in population, employment and wealth. Today the region boasts fewer large public firms than such comparable featherweights as Houston, Atlanta, Philadelphia, San Francisco, Minneapolis and even hard-pressed St. Louis.
This lack of key local players, or even one dominant industry group, makes emulation of other leadership models difficult, if not impossible. In Seattle, voters and politicians alike heed the concerns of the region's top "BMW" companies Weyerhauser, Microsoft and Boeing just as Silicon Valleyites follow the civic models laid down by companies such as Hewlett-Packard, Intel or Applied Materials. Big oil and real estate can still energize cities such as Houston; banking calls the shots in Charlotte. In New York, the combination of Manhattan property owners and media moguls dominate the policy agenda.
By comparison, Los Angeles' business community has become ever more diverse, fragmented and dispersed. The regional economy has so many powerful drivers entertainment, international trade, aerospace, fashion and all sorts of light manufacturing that it is almost impossible to identify a firm or group of firms capable of speaking for the overall economy. The region's economic power is also increasingly dispersed physically; the Valley, Orange County, the South Bay and the Inland Empire now each boast their own powerful sub-economies and leadership structures.
The emerging business leaders in these burgeoning areas tend to be either uninterested or even dismissive of regional efforts, whether under the aegis of the Southern California Association of Governments or the regional Chamber of Commerce. "Being located in the Inland Empire, I would have no interest in joining any L.A.-based organization," maintains Vaughn Bryan, president of Lois Lauer Realty, a prominent realty firm in the booming Inland Empire.
Such attitudes reflect a critical finding of a new survey of business leaders conducted by the La Jolla Institute: that most businesses generally rank their "local neighborhood" as their primary geography of interest. Not surprisingly, the most effective business leadership can usually be found on the local level, in organizations like the Los Angeles Central City Association, the Orange County Business Council or the Valley Industry and Commerce Association.
Increasingly critical as well are groups organized around industrial clusters, such as the Software Council of Southern California, the California Fashion Association, the Toy Industry Association of Southern California, the Food Industry Business Roundtable, the Biomedical Council of Southern California, the Themed Entertainment Industry Association and Lawnmower, the region's thriving, 500-company-strong multimedia networking group. Another growing source of potential business leadership comes from ethnically focused groups, including the Indus Valley Engineers Association, the Southern California Chinese Computer Association and the Latin Business Association.
The first step toward revitalizing regional business leadership lies in accepting the diverse, multi-polar nature of our new economy. These groups are generally unwilling to concede power to a centralized bureaucracy in the bowels of downtown Los Angeles. Instead, there is a need to develop a new paradigm of business leadership built around what futurist and L.A. resident Alvin Toffler calls an "adhocratic" model essentially linking diverse groups when they share common interests on a particular issue.
Over time, such alliances could foster the development of an informal "network of networks" that might find common ground on issues that cut across ethnic, sectoral or sub-regional lines. Such informal linkages already characterize the new economy that has brought Southern California back from the brink. Employing such information-age mechanisms to organize business leadership could guarantee that, when the bad or at least less good times roll, we don't fall into the abyss again.
Joel Kotkin, a senior fellow with the Pepperdine Institute for Public Policy, is the author of "Business Leadership in the New Economy: Southern California at a Crossroads," to be published next week in conjunction with the La Jolla Institute.
For reprint and licensing requests for this article, CLICK HERE.