COMMENTARY ON THE ECONOMY : New Engine Will Propel County to More Prosperous Future : Small businesses, mostly entrepreneurial and in large part focused on new technologies, are poised for rapid growth.

I just don’t buy the conventional wisdom that Orange County’s long-term economic future is bleak.

Or that we are economically doomed and should be packing our belongings into a U-Haul van and heading for any friendly border.

Or that our county’s essential and irresistible vitality has somehow disappeared in the ashes of recession, never to be recaptured.

Granted, virtually all of us have felt the harsh bite of this recession.

We are struggling with doubt, fear and uncertainty as we try to understand the profound structural changes underway in our economy and what it means to each of us.

The historically significant engines of economic growth in Orange County--real estate, construction, finance and manufacturing related to defense and aerospace--are operating on fewer cylinders.

Additionally, the crippling lack of business credit and the rapid transition to a global economy are forcing many other companies to change the fundamental ways they do business, often meaning wrenching dislocation to stay competitive and survive.

Our company (the Irvine Co.) has been among them and has gone through the pain of downsizing.

So why shouldn’t we be discouraged by the barrage of negative headlines, pessimistic analyses, sobering statistics, not to mention our exposure to family members and friends who have lost jobs?

Why shouldn’t we be discouraged knowing that recovery probably is 18 months away and that this recession may get even worse before it gets better?

Because beneath the highly visible rubble of this recession rests a less visible, less understood, less appreciated foundation of small entrepreneurial companies that I believe will assure our vigorous, long-term economic health.

They are the new backbone of Orange County’s economy; the job producers of the future.

They are dominated by a diverse base of some 80,000 businesses and 1.3 million jobs.

By and large, these are small, lean entrepreneurial ventures; 90% of them employ fewer than 100 employees.

Perhaps most significant, many represent industries widely acknowledged to be on the cutting edge of future economic growth: Electronics and communications; computers and software; biotechnology, medical devices and pharmaceuticals.

And they produce a dazzling variety of products and services, making us less and less dependent upon large employers pursuing a single product line.

This activity is occurring in virtually every city in our county. But for the sake of illustration, I’ll focus on a geographical area I know best.

Irvine Spectrum is a hotbed of technological innovation springing from 1,600 companies employing 30,000 people. More than 85% of the companies have fewer than 50 employees.

Even in this prolonged recession, many of these companies are holding their own, and even growing, strengthened by export demand. Slightly more than 2% of those jobs are tied to defense and aerospace.

Who are these companies? What are they doing?

* Birtcher Medical Systems has developed the Argon Beam Coagulator, a surgical instrument that coagulates blood more rapidly and reliably than conventional electrosurgery.

* MicroSim Corp. has developed the breakthrough computer software PSpice.

* Wang Data was the first company to introduce data compression on digital audiotape drives.

* And the Miata sports car was designed by Mazda in Irvine.

More typical than not is the story of Bill Blum, co-founder of Pinnacle Micro, the world’s leading supplier of rewritable optical laser disks. His company has moved three times in Irvine, growing from 4,000 to 32,000 square feet. And he expects to expand into an additional 30,000 square feet within a year.

And when the recession ends in Orange County, our small companies are poised to aggressively (and I believe successfully) compete in a vastly different and changing world economy.

What we need to recognize is that under our noses, Orange County has changed profoundly.

In 30 years, it has gone from a residential suburb of Los Angeles--where most people lived here and drove to Los Angeles for work--to an increasingly mature, sophisticated, stand-alone urban area and market.

We have grown precisely because this has been an attractive place to live, work, invest and play.

We have marketed the advantages of our region in order to attract new companies, but much of the small company job growth began here in Orange County because of our region’s historic encouragement of entrepreneurs and risk takers. It was not imported.

And, in my judgment, the future growth in our employment will largely stem from internal growth of small companies already here.

But it won’t happen by accident, even given our many natural assets.

It will take targeted, cooperative efforts like that underway by the University of California at Irvine, the city of Irvine and the private sector to encourage the growth of Orange County’s health science industry.

This industry is widely admired and includes a diversified base of companies scattered throughout our county manufacturing a sophisticated array of medical devices, a growing managed health care network, and the early stirrings of the biotechnology industry which could be the preeminent growth industry of the 1990s.

UCI will play a key role, in part because of its growing stature as one of the nation’s leading research institutions. In health science, UCI has a substantial and growing reputation for its research into cancer, the neurosciences, imaging, molecular genetics and cardiovascular problems.

Recently, CoCensys Inc., a start-up bio-pharmaceutical company doing exciting breakthrough research into compounds that influence brain receptors, chose Irvine as its headquarters. It was seen by analysts as a major coup, and important for building our biotechnical base.

I believe CoCensys was influenced in its decision by the strength of UCI, the biotechnology companies that already have chosen to be here, and by the enthusiasm and level of cooperation between the university, government and the private sector.

The lesson is clear: If we are to reap the enormous economic dividends of these most promising industries, we must work cooperatively to create a broad infrastructure of education, science and business to support small and promising start-up ventures.

We can’t ignore or take for granted the needs and concerns of the entrepreneur, the risk taker, the little guy with a big dream, and the small company with a product or a process that will change the world.

Our economic future is in their hands.

And if we understand why economic change is occurring and adapt to it, help shape it, encourage it, I believe there is reason for great hope and optimism about our future.

There is another side benefit: As the economy of Orange County is further transformed, we can also look forward to new leaders; successful people with fresh energy and ideas, who can help address our very real and often perplexing problems, most of which pale in comparison to most other urban areas in California and America.

It is said that in the decay of winter rests the renewal of spring.

As the slush of this recession melts, I believe our economic landscape will be very different. I believe our small business base will be thriving with new, exciting economic growth that will make Orange County an even better place.