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THE NEXT LOS ANGELES / TURNING IDEAS INTO ACTION : How can we take advantage of the mosaic of entrepreneurship that makes business life so vital in Southern California? : MYTHBUSTERS : An Economy That Works

July 17, 1994|JOEL KOTKIN JOEL KOTKIN..BD: Kotkin is a senior fellow at the Center for the New West and a fellow at the Pepperdine School of Business

1) All the fast-growing, exciting companies are located elsewhere, mainly in other states and countries.

Good thing no one told that to Dirk Gates or 32 other California chief executive officers on Inc. Magazine's list of the nation's 100 fastest-growing companies. California may be suffering from layoffs and over-regulation, but it clearly remains the best place in America--and arguably the world--to start a fast-growing company, particularly in fields such as high-technology and entertainment.

"California has exactly the kind of employees I'm looking for," says Gates, whose Calabasas based Xircom Inc. ranked fourth on the Inc. list. "Well-educated, hard-working and ambitious."

2) Our work force is not as well educated, especially when compared to brain-rich areas such as Seattle and Portland.

A recent survey by the accounting firm Price Waterhouse found that in northwest Los Angeles County and Ventura County, 24% of adults boasted bachelor's degrees, compared to a national average of 20%. In fact, Los Angeles' Westside and Orange County rank at the top (along with the San Francisco area). By the way, that's ahead of Seattle and Portland.

"Southern California has one of the most diverse talent bases in the West and in the country," says Price Waterhouse analyst Denis Macheski. "It's just not a very well known fact."

3) We do not benefit from the "spinoff phenomenon" that characterizes vital economic centers such as Silicon Valley.

Well, what about AST Research and the new enterprises it has wrought? From the Irvine-based computer firm has sprung several successful companies, the most notable being Kingston Technologies in Fountain Valley. Founded five years ago by former AST manager John Tu and his partner David Sun, Kingston is among the fastest growing firms in the country, with annual sales approaching $700 million. Tu is also involved with AST co-founder Tom Yuen in another venture, called NuReality, that seeks to meld computer technology and multimedia.

4) What growth companies we have are located largely in suburban areas such as Orange and Ventura Counties.

A recent survey by Cognetics in Cambridge, Mass., ranked 778 metropolitan "sub-markets" by their per capita population of "gazelle"--fast-growing--firms. Among the top 20 were four Southern California communities, Sunnyvale and Irvine--no surprise there--but also South Gate and Compton.

Compton economic development official Vladimir Jefferson says the city has enjoyed expansions linked to its location near the port, Century Freeway and Metro Rail.

Another south L.A. County firm making it big is Casa Herrera, which makes chip- and tortilla-making equipment for the burgeoning Mexican food industry. Nationwide sales of tortillas alone have grown from $350 million to over $1.5 billion.

5) Innovative business ideas no longer emanate from Southern California.

Don't tell that to Seaborn Beverages, a fledgling Newport Beach company that is the first company to sell desalinated ocean water.

Seaborn has begun to sell the treated water taken near Catalina Island. Its appeal: it actually has less salt and dissolved solids than conventional bottled waters. Over its first months in business, says company co-founder Bruce Sweyd--a former executive with Original New York Seltzer--shipments have more than tripled to over 4,000 cases a week, with half now sold outside the region.

6) The local textile business is in decline as more and more operations move overseas.

With the growth of the region's apparel industry, Southern California has developed a thriving textile trade that has gone from virtually nothing 30 years ago to more than 30 mills employing more than 30,000 workers.

The largest player today is L.A. Dye & Printworks, which was founded 11 years ago and now employs 1,400 workers. Company President Helmut Ackerman, a German immigrant, and his chief financial officer, Raymond Tsang, a native of Hong Kong, expect their firm to expand with the growing popularity of the "California look." With styles changing so often, Ackerman expects customers to keep shifting from distant Asian producers to Los Angeles-based mills.

7) Los Angeles' image is bad for business.

Despite the much-reported problems effecting the region, the Southern California lifestyle has spawned a number of shampoo- and cosmetic-related companies.

Bob Berglass, Rancho Dominguez-based DEP, says that for his company, being located in Los Angeles is a key marketing asset. His best selling hair treatment line is called "L.A. Looks".

"They love the L.A. image," says DEP marketing manager Cindy Zielinski, who recently moved from the East Coast.

8) There are no new jobs in aerospace.

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