L.A. Should Take a Cue From Silicon Valley

At opposite ends of California, regional leaders recently provided equally opposing snapshots of their self-organization and their future.

In San Jose, Joint Venture Silicon Valley Network, which is a 5-year-old consortium of business and government leaders from 23 cities and four counties, released a report detailing Silicon Valley’s accomplishments and challenges. The most immediate problems noted were clogged transportation networks and increasing house prices. On the positive side, the area now offers the highest wages in the nation and its public-private partnership, symbolized by the report itself, remains strong.

Meanwhile, 350 miles south in Los Angeles, the northern aura of consensus finds its reverse image in local disarray. The latest flap involves a threat by five health-care organizations to move their headquarters, not to a remote South Dakota town or a lower-wage developing country, but simply across the city boundaries, to Burbank. The immediate issue is the size of their tax bills, and four other cities have jumped into the bidding war, with each competing to ensure that the lucky winner will pocket the lowest fiscal gain. Meanwhile, employment growth remains tepid, and housing prices are stagnant.

Why is there cooperation and boom in the north, distrust and slower growth in the south?

The answers lie partly in the nature of the business sectors in each area but also suggest the importance of leadership at the policy level. Business in one area has adopted a broad view and a proactive stance; business in the other has too often focused on narrow concerns and short-term reaction.

The collaborative attitude in Silicon Valley is consistent with its history. As UC Berkeley urban planner Anno Saxenian points out in her book “Regional Advantage,” Silicon Valley is populated by firms that exhibit both the stubborn independence that has led to creative technology and yet a willingness to build and maintain relationships with customers and suppliers.

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Engineers and other key workers frequently shift among various start-ups, fostering an attitude that they work more for Silicon Valley than for any particular enterprise. Technological secrets are jealously guarded, of course, but business leaders frequently consult one another to find solutions to the problems of making new software and hardware work as planned.

Both the relative openness and the “density” of relations between business and technological leaders constitute what Harvard political scientist Bob Putnam has termed “social capital.” Like physical capital, social capital enhances productivity: Able to rely on others, each firm is more productive than it would be on its own. Business leaders who have matured in an area rich in such social capital often tend to reach out more to others, even as they maintain a broad policy perspective.

Silicon Valley, for example, is the home of the Santa Clara Valley Manufacturing Group, a business-led organization that has worked with labor unions and environmentalists to solve problems of transportation and housing.

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Unusual in the ranks of business groups, the Santa Clara Valley Manufacturing Group has actually led battles to increase taxes, arguing that such hikes are necessary to fund the highway expansion and light-rail construction that will enhance mobility for their workers. The Santa Clara Valley group, worried about the area’s ability to house its employees, is currently hoping to persuade voters to help finance moderate-income housing, an effort that will build on its previous work with local housing activists.

In this milieu of civic-oriented business networks, Joint Venture Silicon Valley Network was formed in 1992 in an attempt to craft a coherent response to the regional shocks wrought by defense downsizing and high-tech restructuring. Forgoing the usual political jurisdictions, it has stretched across multiple city and county borders to define its constituency as the set of “business clusters” that characterize Silicon Valley’s high-tech industries. Recognizing that Silicon Valley’s competitive edge in the world economy is not simply its technology but also its unusual set of inter-firm relations and public-private partnerships, Joint Venture has brought together business and government leaders in effective working groups to change policy and seek common ground.

The results attributed to Joint Venture have been impressive. In collaboration with local governments, it managed to persuade 27 cities across two counties to adopt a uniform building code, a strategy designed to stop unproductive inter-city competition even as it helps firms speed up the process of constructing a production facility and bringing a product to market. Joint Venture has also developed a Silicon Valley Index, a set of indicators noting how Silicon Valley as a whole is doing. As time has evolved, the organization has paid attention not simply to the number of start-ups and other typical business concerns, but also to educational problems, opportunities for female-owned firms, private giving to nonprofits and other traditionally “social” concerns.

The picture is not all rosy. Silicon Valley has experienced a sharp increase in temporary employment, complete with the worker insecurity this can entail. Joint Venture is only now doing outreach to lower-income individuals and communities, hoping to ensure that the productivity-enhancing web of “social capital” is vertical as well as horizontal.

Still, Los Angeles business and government decision-makers could learn from the leadership style and positions taken by their Northern California counterpane. Raiding one another’s cities in the hopes that businesses will jump borders within the region does little to add to the aggregate total of jobs in Southern California. Cooperating to set a common floor of public policy would allow municipalities to focus more on the joint strategies likely to ensure that firms will “stick” in the region as a whole.

Business, meanwhile, should resist the temptation to encourage short-term bidding wars. Southland firms have better reasons to join together--they will all benefit, for example, if our educational system is improved and regional mobility of goods and people is enhanced.

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Unfortunately, area businesses have tended to unite only to resist initiatives launched from other quarters, such as the rapid coalescing of business to oppose the labor-sponsored drive to require higher wages from those firms subcontracting with the city of Los Angeles. Yet it is incumbent upon business to do more than just say no.

Indeed, moving the region forward will require a shift from nervous reaction to thoughtful pro-action, from competition to collaboration. Joint Venture’s very name offers a key lesson: Together we can grow, apart we will drift. Los Angeles business would do well to accept this challenge of leadership.

Manuel Pastor Jr. can be reached via e-mail at mpastor@cats.ucsc.edu