There is an old saying: never buy anything from someone out of breath.
Too many financial companies, including mortgage companies, hedge funds and banks, were doing deals in recent years that should have left them out of breath. What they were selling was little more than hot merchandise.
More recently, the government seemed to be the one out of breath as it tried to sell its $700 billion bailout. Seven hundred billion dollars is a number, not a plan. You can tell there’s not a lot of confidence in Washington’s leadership on this when a money manager on CNBC recently referred to our secretary of the Treasury as a “kid.”
Then we come to the $800 billion stimulus bill, a bill designed not by economists but politicians. How much confidence does that give you? We were breathlessly told it would be a catastrophe if this bill didn’t pass. It passed and the markets went down.
Consumer and business confidence tells us that people don’t think we’re any closer to knowing how this recession ends. I agree. Needless to say, we all deeply and fervently hope that the administration’s plans are successful. But we in business cannot simply hope for the best. We must prepare. Hope is not a plan.
My company’s forecast of the broader economy is for more pain more bank failures, more tight credit, more job losses and more commercial foreclosures.
So what to do? Our company is retooling to take advantage of the crisis. We are investing in our greatest asset our people. We’re retraining our development people to become acquisition people. We’re preparing to buy existing real estate assets as well as bank debt secured by real estate assets.
A business cannot say to itself, well, if we just wait out the current turmoil, things will be fine; things will go back to normal.
A city can’t afford that attitude either. If businesses are making fundamental changes in response to the economic crisis, should the city of Los Angeles be any different?
I believe there is an opportunity here for the city to redefine itself, to hang a question mark on things it has long taken for granted. This crisis gives our elected officials permission to make sweeping changes that they could not do in better economic times. The question is whether they are bold enough and tough enough to be real leaders.
When the UAW is agreeing to sweeping change in hopes of keeping Detroit’s auto companies alive, should Los Angeles be immune from rethinking its ways?
In one statistic alone, I can give you the rationale why this city, at this time in its history, must change. The statistic is this: Since 1980, the city of Los Angeles has added 1 million people to its population. In that same period, it has not added one new job. In fact, it has lost 50,000 jobs. People are going to surrounding cities to work, if they can find work at all.
El Segundo has 16,000 residents and 70,000 jobs. It has more Fortune 500 companies than Los Angeles. When it comes to jobs, the cities around Los Angeles are eating its lunch.
Fortunately, a number of organizations are strategically looking at what should be done, such as the Los Angeles Economic Development Corp. and the Los Angeles Area Chamber of Commerce. They point out that we need to make economic development which means retaining, expanding and attracting jobs a clear and urgent priority.
We need to streamline the planning, development and permitting processes.
We need to reduce and eventually phase out the city’s gross receipts tax, which skims money off the top before a business ever makes a profit. Skimming off the top is what the mob used to do in Las Vegas, it has no place in Los Angeles.
We must educate people that the word “industrial,” as in industrial land use, is not a dirty word. It is a green word green and lush with jobs, tax revenues and growth.
As business leaders, we cannot wait for the city. We have to lead. We must relearn how to use the muscles of civic influence. Labor uses its muscles all the time, as they should but so should we.
Business is the base of all jobs. I believe we need to reframe our public argument from “business friendly” to “jobs friendly.”
Los Angeles has an unemployment rate of over 10 percent and rising. It is simply not enough to wait for stimulus money. It is simply not enough to wait for recovery.
The city of Los Angeles must become pro-business. It must become pro-growth. It must become pro-jobs.
All of you as business people have a unique perspective and broad capabilities to come out on top and reap the benefits as not a mere survivor of these times, but one who thrives as the economy heats up.
And at a time when it’s tougher than ever, it’s even more critical to bring our great city along and take the lead. As business people we need to be involved, active, and demand of our elected officials leadership that is not only expected, but required. And it can be done. Our future is bright as long as we are.
Now is the time to make it better.
Rick Caruso is a real estate developer known for building the Grove and other Los Angeles-area shopping centers. This editorial is part of a speech Caruso made March 12 at the Millennium Biltmore Hotel Los Angeles when he was named as the Business Journal’s Business Person of the Year.
