Surf’s Still Up

Why is California such a hotbed of innovation and growth? Respect for entrepreneurs and an openness to change are two key reasons.

Is it the soil or the farmer that produces the crop?

Was it the invention of the microchip, the gene splicer and, earlier, the movie camera that have made California an extraordinarily fertile place for business and every other endeavor? Or was it the state’s good luck that inventive, enterprising people happened to reside here?

Congratulations abound these days now that the California economy once again leads the nation in job growth and new companies creating riches.

“California still has a culture of entrepreneurs, of hustle and of gold rush that most of the East Coast has lost. California still respects entrepreneurs,� says David Birch, a nationally known expert on small business--who nonetheless chooses to live in Massachusetts.

But should we go beyond congratulating ourselves and inquire: Why does California respect entrepreneurs? What exactly is a “culture of hustle and gold rush�?

It is respect for ideas and openness to change that underlies this exciting economy that keeps placing new companies on the Times 100 lists year after year.

It’s a culture best understood through its unsung heroes.

Frederick Terman, dean of engineering at Stanford University, learned from example in his student days at the Massachusetts Institute of Technology that universities and industry complement each other.

“It was easy for a professor to find things to do in industry, where his specialized knowledge was of use,� Terman wrote of MIT in memoirs recounted in “Regional Advantage,� a book on the wellsprings of innovation, written by AnnaLee Saxenian, a UC Berkeley professor of regional planning.

At Stanford, Terman taught William Hewlett and David Packard, encouraged them--and loaned them $538--to found Hewlett-Packard Co., one of the world’s standout corporations and No. 32 this year on The Times 100.

The atmosphere Terman fostered at Stanford was to encourage many others, including James Clark, the founder of both Silicon Graphics, No. 78, and Netscape, No. 71 on the Market Value 100.

Sometimes the heroes are indirect as well as unsung. Harry Bridges, the Melbourne, Australia-born leader of the International Longshoremen’s and Warehousemen’s Union, contributed greatly to California’s current prosperity. First, in 1937, he separated his West Coast union from the mob-ruled East Coast dockworkers--and largely eliminated corruption from the California piers.

Then, in 1960, Bridges negotiated a pact with shippers that allowed mechanized container loading in return for handsome pay and retirement packages for his members. The result was greater benefits for all.

Thanks to its openness to new technology, the West Coast progressed in the movement of trade, making Los Angeles and Long Beach the largest ports in the nation and spawning a new industry of freight movement called logistics, in which Fritz Cos., on The Times Employer 100, and other California firms are leading innovators.

Support of change is critical. Paul Romer, the young Stanford Graduate School of Business professor who sees ideas driving the contemporary economy, has noted that inventions can lead nowhere without a supporting environment.

“The Chinese had movable type 400 years before Gutenberg,� says Romer. “Nevertheless, the political and social system in China eventually stifled the incentives for additional discovery.�

That dramatically was not the case with the electronics industry in California, which has no fewer than 39 companies on The Times 100, led by Intel, Western Digital and Cisco Systems.

California also has been the most productive environment for developments in biotechnology. Pioneers include Chiron, high on the Employer 100; Amgen, on The Times 100; and Genentech, which merged in 1990 with Switzerland’s Roche Holdings but remains a separate corporation and is on The Times Market Value 100.

Meanwhile, new companies are growing rapidly--witness Affymetrix on the Wall Street High Fliers list; Amylin on the “gazelles� list; and Heartport Inc., a medical pioneer, on the great-expectations list.

What made the difference in California? Support from UCLA, Berkeley, UC San Diego, UC Irvine, Caltech and Stanford particularly benefited biotechnology. And venture capital helped all the high-tech companies.

The state has brought the art of investing in start-up companies to a high art. Arthur Rock of San Francisco’s Davis, Rock & Partners, an early backer of Intel, Apple Computer and many others, is another unsung hero. Other venture capitalists have followed, and today new companies are multiplying in all industries.

The pattern is historically the same as Hollywood, where decentralized operations created a beehive of independent producers. Only one large entertainment company, Walt Disney, is listed on The Times 100, but that’s because the other global giants--20th Century Fox (News Corp.), Paramount (Viacom International), Universal Studios (Seagram) and Sony--are headquartered elsewhere.

But the center of their film, television and music business is in California, where more projects are in production than ever in the entertainment industry’s long history. And small companies, such as Pixar Animation Studios on the gazelles list, are growing, falling and rising anew.

Hollywood has always been a place of change and chance. Now all California industry is like that--and let’s hope it remains so.

Because no place is guaranteed to remain vibrant. The New York cities of Rochester and Schenectady were hotbeds of scientific discovery and entrepreneurial vigor in the 19th and early 20th centuries--home to the infant Eastman Kodak and General Electric. But both towns grew staid and comfortable and today are distressed communities.

To avoid such a fate, California must retain its culture of inquiry, open to new ideas and new people.

The state’s motto is “Eureka�--�I have found it.� Maybe we should change that to “I am looking for it.�