LETTERS
California Economy
As long-term investors in California-based enterprises, we have more than a passing interest in the fundamental economic health of our state. Not economic health as measured by weekly statistics on unemployment and inflation rates but as measured by structural elements of California’s business climate that significantly affect the prospects for our portfolio companies.
California’s challenges are well documented: our poorly performing K-12 education system; escalating workers’ comp premiums, high marginal income tax rates on individuals, the heavy burden of business regulation and the low affordability of housing. But our strengths are less publicized: a world-class university system (both state and private institutions); a true melting pot of cultural diversity; an economy of massive proportions; a well-balanced mix of business sectors; a concentration of technically-skilled individuals; uniquely convenient access to the growing markets of both Mexico and the Pacific Rim for trade; and exceptional climate and leisure opportunities.
What this means is that those businesses with a significant “intellect” component can achieve profitable growth here. They can take advantage of the pool of well-educated college graduates that our universities produce and our climate and lifestyle retain; earn premiums for their products and services sufficient to compensate employees well, thereby making housing affordable, the state income tax burden manageable, and time for recreation available; operate safe and clean business that limit exposure to regulatory “hot spots,” such as workers’ comp and environmental liability; and defend effectively against the lower unit labor costs of offshore competitors.
High-intellect enterprises need not necessarily be classic “high-tech.” Service businesses offering consulting, staffing, training or marketing expertise may have a significant knowledge component. Distributors deploying sophisticated information technology systems to maximize profitability for their customers and minimize logistics costs are engaged in a brainpower-based enterprise. Even manufacturing enterprises using proprietary processes to maximize quality and minimize shop floor labor can qualify as high-intellect.
So regardless of your industry, increase the IQ element of your product or service offerings to maximize success in California’s current business climate.
Patrick C. Haden and Murray E. Rudin
(Haden, in Los Angeles, and Rudin, in Irvine, are partners with the private equity firm of Riordan, Lewis & Haden.)
Jayson Blair
Regarding Rick Reiff’s June 23 Notebook on the New York Times’ Jayson Blair scandal:
Affirmative action, a law that I support, basically says hire minorities because they are minorities; give them a chance. It doesn’t say keep incompetents or liars. Any company has an obligation to itself to monitor any hires, minority, favorite or otherwise.
As for companies putting known incompetents into senior positions, it is done all the time.
Ed St. Amour
Mesa Verde
Thanks
Thank you so much for putting me in your June 23 OC Insider column. It was fun seeing my name there, and my office got a kick out of it. By the way, I now know how popular not only the Journal is but the Insider in particular. I got a ton of calls from friends and acquaintances who read it,and also a lot of calls from various solicitors!
Dale Skiles
Vice President
Transtar Commercial Real Estate Services
Corona del Mar
