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Thursday, Jun 8, 2023

COMMENTARY–L.A.’s Richest Are a Street-Smart, Self-Made Bunch

The release of the Business Journal’s latest list of L.A.’s rich and powerful reveals more than just who has the biggest bank account. It also tells us a great deal about what kind of people now drive our economy and to some extent, the global economy as well.

Three things stick out on the list. First, there is a growing preponderance of information-industry fortunes, including entertainment moguls (Geffen, Spielberg, Field), telecommunications giants (Perenchio and Winnick) and now, for the first time, an Internet mogul, Idealab’s Bill Gross. Almost totally missing are some of the linchpins of Los Angeles’ economic past founders of aerospace firms, for example, or oil companies.

The growing importance of information industries spanning a broad range of activities from media and entertainment to telecommunications and computers has accelerated this process, and will likely continue to shape the list in the coming decades. In the past 20 years, information has doubled its share of the U.S. economy.

Further, differences in productivity between one region of the country and another are usually explained by the amount of tech-industry activity in those regions, according to Milken Institute economist Ross DeVol.

The result of these changes is the emergence of a social order first envisioned by Daniel Bell in the 1970s, in which information supplants energy and conventional manufacturing as the critical source of wealth. The location of information industries will also likely determine where the elite pockets of wealth are found.

In 1984, the technology and entertainment industries accounted for 23 of the Forbes 400 richest Americans; 10 years later, that number had swelled to 57. Seven of the top-paid corporate executives on Forbes’ best-paid list this year head computer or information firms.

The second broad trend can be seen in the highly entrepreneurial nature of the list. Virtually all the top 10 of L.A.’s richest are self-made men. Many top earners such as Geffen, Spielberg, Davis and Broad, were born and raised elsewhere. Only Ted Field, a member of the Marshall Field family of Chicago, came into the fray loaded.

This has some good and bad aspects. The ability to rise has always been a Los Angeles trait. This city has virtually no permanent aristocracy and hardly any families whose “A” personalities have survived more than one or two generations. As one entrepreneur once told me, “The ruling class here is only one generation removed from the bandits.”

Clearly, the old L.A. “ruling class” is in remission. No Chandlers, Dohenys, Buffums or any of the old guard are represented in the top 10. Going to the mail room, or film school, seems to be as sure a way to the very top as belonging to an august family or the right USC fraternities.

Yet a city of entrepreneurs also has a down side. A look at the list finds few people who still control their own major independent companies. In fact, Broad, Burkle and Udvar-Hazy all owe much of their vast fortunes to selling their firms to others. Davis is a renowned company flipper; Geffen and Gross, although very much in control of their own firms, made much of their money selling past enterprises.

But that’s L.A., and we might as well acknowledge it. This is not a city of old establishments; we have empire builders, but few empire-keepers. Old bloodlines run very weak here. Indeed, that leads to the third, and arguably most controversial trend in our richest list: the preponderance of Jews.

Los Angeles has had a prominent Jewish community since the 1880s, when German-Jewish immigrants dominated the earliest merchandising empires in town. Later on, it was predominately the eastern Europeans who came to run the entertainment industry.

But even as late as the 1970s, the WASPs still held many key sectors of the economy notably in oil, real estate and publishing. Now those industries have moved on, through mergers and acquisitions, and the remaining business establishment is largely made up of those who have made it on what in Yiddish is called sechel, or street smarts.

That’s the common thread that runs through the brilliant maneuvers of a Winnick, Gross, Spielberg, Broad, Geffen or Davis. It is not that only Jews have these characteristics, but they tend to reside heavily within the group. It’s not that all Jews are smart I could introduce you to some pretty dim cousins of mine but that a lot are, and a few of them, are impresarios of business.

So what does this list say about the future? Well wait a decade and you’ll see some changes, and some things that will remain the same. Ethnically, we will see the emergence of new ethnic groups Asians and Latinos who are already hungry and only starting their crawl up the greasy pole. We will likely see more information entrepreneurs. And clearly, Bill Gross will not be the only Angeleno to make it to the top 10 through the new media.

Finally, given the past, one thing is for sure: The list 10 years from now will probably be a very different one from today’s. That’s L.A. and what makes it the crazy, exciting, often maddening business city that it has always been, and likely always will be.

Business Journal columnist Joel Kotkin is a senior fellow with the Pepperdine Institute for Public Policy and a research fellow at the Reason Public Policy Institute.

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