High Time for High Tech? Experts Ponder Southland’s Possibilities

Southern California’s high-tech companies are in the midst of a notable growth streak. But where is the Tech Coast headed, and where should it be going?

To answer those questions, The Cutting Edge invited some of the Tech Coast’s most influential people to breakfast at the Four Seasons Hotel in Los Angeles to discuss the future of technology in Southern California.

The group consisted of David Baltimore, president of the California Institute of Technology; state Sen. Debra Bowen (D-Marina del Rey); Tim Draper, a Silicon Valley venture capitalist who is shifting his focus to Los Angeles; Garry Betty, chief executive of EarthLink Network; Jon Goodman, executive director of EC2, a high-tech business incubator at USC; Alfred Mann, who founded MiniMed and several other biotechnology firms; Rohit Shukla, executive director of the Los Angeles Regional Technology Alliance; and Dick Sim, the Irvine Co. executive responsible for building the Irvine Spectrum and University Research Park in Orange County.

They were joined by Times Business Editor Bill Sing, Senior Economics Editor James Flanigan, Technology Editors Lisa Fung and Bill Loving and reporters Karen Kaplan and Ashley Dunn.

What follows are highlights from the hourlong discussion. A full transcript is available on The Times’ Web site at http://161.35.110.226/HOME/BUSINESS/CUTTING.

Times: You’ve all done various things in your own spheres to try to boost the technology industry here in Southern California. What do you think is the potential for the industry here? Should Southern California try to be the next Silicon Valley, or should the goal be something different?

Bowen: I don’t think our goal should be to be Silicon Valley. We’re more entertainment-applications-oriented, and we have the legacy of the aerospace industry. That’s very different from what Silicon Valley has.

Draper: The reason we’re coming down to Los Angeles is that this is a very exciting time. The world economy is opening up with the Internet, and once the infrastructure is built out, all of this great content is going to have to be placed on the Internet and we will have a whole new platform with which to entertain. With the pulling together of Hollywood entertainment and the technology in Silicon Valley, we have the possibility of being the next big industry.

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Times: There are lots of people who say that technology already is the next big industry in Southern California--but that the general public just doesn’t know about it.

Sim: That’s right. In Orange County, we have five major clusters--computers, software, medical devices, biomedical and a huge automobile design center. Most of the other areas, like Austin or Silicon Valley, have only two clusters. For us to emerge with five clusters I think is fantastic.

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Times: The biological sciences have become essential in Northern California and San Diego. What are the possibilities here in Los Angeles and Orange County?

Baltimore: The possibilities are enormous. We have great educational institutions here, and we have a number of successful companies. The largest biotechnology company in the world [Amgen] is here in the Los Angeles area. There’s a desire on the part of the hospitals and the institutions to spawn a much larger biotech industry in L.A.

Mann: I’m chairman of the Southern California Biomedical Council, and our objective is to try to build a biotech/biomed base here in the Greater Los Angeles area. There are some very exciting companies here, but the biggest problem for them has been the inability to raise capital. So we’re trying to create a biomedically oriented venture capital community down here.

One of the other problems is finding space. I’ve been involved with Cal State University, Northridge, on their North Campus project, with the Veterans Administration in West Los Angeles to try to organize a biomedical center there, with Pierce College, with Harbor-UCLA [Medical Center], and we’re looking into what we can do at USC around the health sciences campus. There are a lot of opportunities for us--we just have to organize it.

Draper: To build out a region, there are a lot of things that have to come together. We’re trying to emulate some of the things that work in Silicon Valley and then adapt them to Los Angeles. In Silicon Valley, we have a venture capital community, and in Los Angeles they are pretty much spread to the winds. I’m encouraging them to congregate--or at least get to know each other well--so they can share deals and work together.

Goodman: Welcome to Los Angeles. Our venture capitalists have known each other and worked with each other for years, and I hope they don’t get as close as the Silicon Valley guys did. We’re talking about lemmings over a cliff. Imitation is the sincerest form of flattery. It is certainly not the sincerest form of creativity or intellectual attainment.

I hazard a guess that there isn’t a person sitting at this table who isn’t truly concerned about the state of the educational system. When the San Antonio corridor in Texas decided to support the biotech industry, one of the first things they did was work with the community college system and get an advanced training program for recombinant DNA technicians and wet-lab technicians and the kinds of skills that you really need in the work force. I anticipate the only hindrance to the extraordinary growth of this community is going to be labor force shortages.

Bowen: We don’t want to replicate some of what Silicon Valley has done. Our traffic is bad enough here. Anyone who’s ever driven through San Jose doesn’t want that part of the success replicated. Nor do we want the high housing costs that drive a lot of that traffic.

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Times: Silicon Valley may be expensive, but people can send their children to public schools. In L.A., that’s a very problematic thing. Do the engineers and other workers want to locate here?

Mann: That’s one of our greatest obstacles--how are we going to build it so we can get people to come here? MiniMed alone has to hire 8,000 people in the next five years. Where the hell are we going to get them? We’ve concluded we can’t do it here. We’re going to have to build factories elsewhere.

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Times: Garry, where are you getting employees for EarthLink?

Betty: We have a difficult time attracting key technology resources and subject matter experts for several reasons. If it’s a family matter, it’s that the schools aren’t great. In other cases, people would rather have lots of alternatives, and moving to Southern California isn’t as attractive as going to Silicon Valley or Seattle--or even some of the other tech centers around the country--where they could easily change jobs.

We’ve opened a call center in Sacramento because the labor pool, even for basic-skills people, has been tapped. Only one out of every 25 or 30 applicants we get is even qualified to do the job. In Sacramento, it’s about one in 10. We’ll probably open another call center in Las Vegas or someplace else.

Baltimore: I think we’re missing something, and that is that there isn’t really a culture of entrepreneurship. That includes not only venture capital but the ability of people to move within their industries so they can develop skills and move from one company to another, so that everybody is an incubator for everyone else. I don’t see that here.

Rohit Shukla: It has happened in two industries. The aerospace industry was exactly like that. Everyone knew everyone else, and they could hire from each other. The second industry with the same characteristics is the entertainment industry.

Mann: One of the greatest problems you have in Silicon Valley is the predatory nature of recruiting. I think that is ultimately going to be a major impediment to growth in Silicon Valley in the future. We don’t have that problem here.

Shukla: The increase in venture capital has been fairly dramatic, but once these companies get capitalized, they get cannibalized and taken elsewhere. Why is that? Because they’ve had trouble finding a CFO or a CEO. Part of the reason that happens is that we haven’t been able to grow that many companies that go through that kind of cycle, so we don’t have the people.

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Times: In the Irvine Spectrum, they have people who go from one company to another. What is the secret of Orange County?

Sim: We had the benefit of a lot of land, and what evolved was a master plan that allowed for a high quality of life, a significant amount of open space and great educational institutions. But it took 18 years to get to where we are now. We’re just beginning to bear the fruit of what we did 18 years ago.

Shukla: One of the problems we have in Los Angeles is the extreme challenge of multiple jurisdictions. You cannot possibly build out the infrastructure without having all of the cities work as a seamless whole. And that hasn’t happened.

Goodman: We also have another challenge, which is probably bigger than anything else. We live in a society, for better or for worse, in which the single most valuable thing is celebrity. And this is the celebrity capital of the planet. A 21-year-old film star who has probably little or no staying power is going to be more important than the next brilliant device that Al’s company might come up with that will cure diabetes.

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Times: Is there any way Los Angeles can use that to its advantage?

Bowen: We do use that. That’s what drives a huge number of small companies in post-production, imaging and all the stuff that goes on in the entertainment industry that’s technology-based.

Mann: Since we have somebody from the legislative arm of the state here, let me try to raise another issue. Several of my companies are being bombarded by invitations to go to other states with enormous incentives that we don’t have here in California.

Goodman: There are states that match every dollar of [federal funding for small businesses] that comes in. There can be joint research between businesses and universities. There are many programs around the U.S. that are very, very attractive in the support and development of technology businesses.

Draper: The difference between this kind of discussion here in L.A. and one we would have up in the Bay Area is we don’t assume the government is going to solve any of our problems. We don’t even think about the government. We just hope they’ll leave us alone.

Bowen: You guys show up asking for funding on transit all the time.

Draper: But this kind of discussion is different from what you would see in Silicon Valley. You’d see a bunch of people saying, “What if we did this?” The only things that don’t work seem to be things that are run by the government, like education and highways.

Shukla: I happen to know very intimately the machinations that go on between the industrial cabal in Silicon Valley and the political cabal in Sacramento.

Bowen: Look at the telecom industry. Try to imagine what would have happened if the Bells hadn’t been broken up versus what eventually did happen. It’s been good for California and good for the industry.

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Times: Garry, is there anything the government could do that would help you run EarthLink?

Betty: I’m worried about getting the phones answered and getting the infrastructure built out. If there were 100 things on my list, the government wouldn’t even hit the top 100.

Baltimore: Are you interested in the Blue Line?

Betty: It wouldn’t help too much. We have people commuting from all over the place, and if they want a certain quality of life, they’ll suffer through a 45-minute or one-hour commute.

Sim: What about a responsible housing policy? That’s important so we don’t end up like Silicon Valley.

Betty: Probably the only reason we can get anyone to move here from Silicon Valley is that the housing is three times as expensive up there. But for my needs, if I need 2,000 tech support people, they could be in Sioux City, Iowa.

Bowen: Actually, it’s a really good thing that state government is not No. 1 on your list of 100 concerns, which tells me we’re doing something right. If you had a problem with the state government, it would be at the top of your list.

Mann: This city has been transformed over the last half a dozen years. We had a government here that was anti-business, and it was so disorganized you couldn’t function. Now it’s completely changed. What worries me is what’s going to happen in a couple of years when we have a new mayor.

Shukla: We’ve got a lot of centers developed here. I’m talking about the South Bay, the Westside, the West Valley, Pasadena. But they don’t happen overnight.

Goodman: It’s more difficult here because the geographic spread is so extraordinary. But nonetheless, when you look at the sheer magnitude of technology companies, the regional economic output from technology businesses is a pretty damn big engine and, in fact, is really doing very well. In the absence of any reason not to continue to grow, it will continue to grow.