The Midopolis in the
Digital Economy
Editorial by Joel Kotkin
Joel Kotkin is a Senior Fellow with the Pepperdine Institute for Public Policy and research fellow in urban studies for the Reason Foundation. He is the author of the forthcoming Repealing Geography: New Rules for Place in the Digital Age to be published next year by Random House. He lives in Sherman Oaks.

As it enters the new century, the Valley has become something other than a prototypical suburb. It is now a community caught between a quickly growing, high-tech oriented periphery and the traditional city -- a kind of midopolis -- that blends an increasingly urban reality with a primarily suburban infrastructure. 

Like many other midopolitan communities such as the San Gabriel Valley or Long Island outside New York, the Valley now finds itself locked in a competition for jobs and investment with both the old city and the newer suburbs for its place in the evolving information economy. These industries --- spanning a broad range of activities from media and entertainment to telecommunications and computers --- have over the past twenty years doubled its share of the US economy. 

Such activity, according to the Milken Institute economist Ross DeVol, now accounts for nearly two-thirds of the differential in economic growth between various regions and most of the nation’s growth in productivity. To a large extent, the success of the Valley, like that of most communities, lies in its ability to lure and nurture these industries, and the skilled workers critical to them. 
This represents a new kind of challenge to the Valley. In contrast to traditional industries, the information industries are relatively unconstrained by such limitations as access to raw materials, ports, access to markets and skilled or semi-skilled labor. Instead, for these firms and the generally highly educated workers critical to their success, locational choice has more importance. Even government has only a limited role to play: Surveys of high-technology firms find “quality of life” attractive to skilled workers far more important than any of the traditional factors such as taxes, regulation or land costs.

The individuals tied to these industries --- investors, engineers, systems analysts, scientists, creative workers--- are increasingly what one analyst has called “very sophisticated consumers of place”. To them, the world is essentially a vast smorgasbord in which various locales compete for their affections and attention. 

In this competition to date, the Valley faces two distinct challenges. On the one side there is the renewed appeal of some older, more urbanized areas, notably Santa Monica and Pasadena, for the rapidly growing Internet and digital imaging industries. Virtually all the key major forces in the region’s burgeoning economy -- Entertainment Media Partners, eCompanies, Digital Coast Partners and idealab! -- are located either on the westside or in Pasadena. Dependent largely on an under-30 workforce, these areas possess a kind of fashionable appeal that the Valley, still widely perceived as classic suburb, does not yet possess. 

The other challenge comes primarily for newer, often more planned communities such as Raliegh-Durham, Irvine or, closer to home, Westlake and Thousand Oaks. These communities cannot be described as either “suburbs” in the conventional sense or even as “edge cities” sprawling along the periphery of most major cities. Instead, these communities are best seen as nerdistans, new urban regions built by their ability to attract the rising technological elite. 

Recruitment concerns, not taxes or regulations, drive firms to the nerdistans and out of older midopolitan communities like the Valley says Nancy Tullos, Human Resource Manager at Broadcom, a firm that relocated in the late 1990s from Los Angeles to Irvine. Tullos recalls how on a previous job for Micropolis, a company located in the San Fernando Valley, she was forced to route their visits carefully so they would avoid the Valley’s array of unattractive strip malls, decaying barrios and abandoned defense plants. “ I used to give them maps to get there so they would not have to come up and see what’s on Desoto,” she recalls mirthfully.

Playing to Strength: 
Building the Valley Community

Yet despite these challenges, the Valley enters the new century with considerable strengths, if it can build on them. For one thing, it has a well-developed infrastructure -- freeways, boulevards, industrial parks, and large resident skilled workforce ---that is difficult to duplicate quickly in either the nerdistans or in the inner city. This is particularly true for the critical entertainment complex for which the Valley, with its developed base of soundstages and recording studios, remains the ultimate, and most economically viable, destination. Recent decisions to expand in the Valley by both Dreamworks and Disney reflect the enduring allure of such factors.

The Valley can also take advantage of its increasingly central location. With much growth now taking place on the periphery, the geographic center of gravity in the region is no longer downtown, but in the Valley, which sits conveniently between the two. For companies seeking to cover the LA area -- and tap the region’s diverse skill base -- a Valley location can be seen as increasingly efficient, which may be one reason why it ranks second, well ahead of downtown and only slightly behind the westside, as a headquarters for fast-growing firms.
Finally, the Valley remains the one part of Los Angeles that seems best positioned to remain an economically and racially diverse community. Out-of-sight prices have turned the westside largely into an upper-class enclave, with a few exceptions. Gentrification of some more inner city neighborhoods may have the same effect, as already has occurred in other cities such as New York, Chicago, Boston and San Francisco. At the same time, many communities to the north of the Valley, especially Westlake/Thousand Oaks, are becoming increasingly expensive, a trend likely to be accelerated by an intensifying anti-growth movement.

Yet these trends do not mean that the Valley will inevitably secure its niche in the digital age. Ongoing decline in the school system, for example, virtually guarantees the continuing out-migration of middle class families, not only among Anglos but in the increasingly large Latino, African-American and Asian middle class. Without decentralization and radical reform of the Los Angeles Unified School District, in particular, maintaining the historic middle class family atmosphere connected to the Valley may be difficult, if not impossible.

Finally, and just as importantly, the Valley must nurture a greater sense of community and common interest. Born largely as the offshoot of another city, the Valley has only recently begun to develop its character as an urban place. One positive step has been the growth of pedestrian-oriented districts --- from largely Latino Van Nuys to middle class Sherman Oaks and Burbank’s San Fernando Road to increasingly tony Studio City or Toluca Lake.

Building up these special districts is critical to building a sense of a Valley community. It’s unlikely that the Valley will ever be like a traditional centralized city such as a New York or even Los Angeles. It will never posses a single true “downtown”. Instead, its future lies as a city of diverse neighborhoods, each serving its immediate community, yet adding to the diverse mixture of options for the broader constituency of Valley residents.

Another important part of civic renewal can be seen in the burgeoning farmers’ markets, ethnic and arts festivals which feed off the Valley’s growing ethnic diversity and creative resources. The on-going development of the North Hollywood’s NOHO district, including the recent opening of the El Portal theatre, also suggest the possibilities of incubating a Valley arts community, something critical to attracting the kind of young creatives and professionals needed by information age companies.

Although the halcyon days of the Valley as archetypical suburbia are gone forever, this community can still emerge as laboratories for the creation of a new and potentially important archetype of the American future city --- diverse, democratic, family oriented and dynamic. Yet the keys to this future lies not at City Hall, but in the willingness of the citizenry, and the business community, to invest in the lives both of their neighborhoods and the broader Valley community.

Without this kind of grassroots commitment, any attempts to improve the Valley from above --- political or economic --- will be doomed to diminished results. Like any community, the Valley will be only as good as its citizens and their willingness to work together. “People do not live together simply to be together,” wrote the Spanish philosopher Ortega y Gassett. “They live together to do something together.” 

For the Valley, the time to “do something together” has now arrived.

The Valley in the
New Century

As the new millennium opens, the San Fernando Valley stands at a critical juncture. A product of the great middle class suburban expansion of the post-war era, it has evolved into a complex, increasingly urban, diverse and multi-faceted region. The question is whether those changes can be used to forge a new sense of the community, or whether the area will become a massive digital age suburban slum.

On the economic front, the immediate prospects are fairly good. After the tough days of the early 1990s, the Valley’s employment base is surging, commercial vacancy rates are down in the single digits, and property values are once again rising. The Valley’s strong and varied industrial base includes the largest concentration of entertainment-related employment in the country. As the need for content grows on the Internet, this could anchor the region in the emerging digital economy. 
The Valley also has an increased wealth of human resources. Once primarily Anglo, it has become home to a series of dynamic new ethnic communities, ranging from Vietnamese and Chinese to Mexican, Salvadoran, Iranian and Israeli. This positions the Valley as a potential center of an increasingly integrated world economy.

Yet there is another side to this story. As the Valley has evolved, it has also developed larger pockets of poverty, particularly in its northeast corner; its schools have deteriorated and, although down for now, crime remains a primary worry for a large number of residents. Fractured political leadership, particularly in those parts controlled by the City of Los Angeles, has resulted in a weak political culture and often a kind of hodge-podge pattern of land use. 

Fundamentally, the Valley is both the victim, and the beneficiary, of its own success. First annexed to Los Angeles in 1915, the Valley developed from an agricultural community into a vast bedroom and shopping mall haven for the city’s expanding middle class. Its population quintupled between 1944 and 1960. Shopping centers, housing tracks, churches and synagogues rose like flowers after the rain.

But something more than sub-urbanization of farmland was taking place. Like other new suburbs --- such as Northern California’s Santa Clara Valley, Northern New Jersey and Fairfax County, Virginia --- the Valley was becoming a major center of technology and information-related industries. Not only was Hollywood moving “over the hill” but newer industries, such as disc-drives and telecommunications, were establishing their primary L.A. beachheads there.

According to analysis by Cal State University Northridge economist Shirley Svorny, the Valley today still boasts a sizable concentration of manufacturing, ranging from high-technology electronics and garments as well as some of the most important entertainment related clusters of activity, employing over 60,000 people. Like Los Angeles as a whole, what makes the Valley economy run are small, often highly specialized creative-oriented firms that service the region’s enormous cultural-industrial complex.

This economic diversity is also evident in an election of retail outlets that rivals that of most communities south of Mulholland. Notions of the Valley as a haven for hamburger joints, whitebread malls and generic supermarkets are woefully outdated. Within a ten minute drive of Sherman Oaks, for example, one can find Chinese, Indian, Israeli, Armenian and Latino markets as well as scores of authentic ethnic restaurants, clothing stores and bakeries.

Yet as the Valley has grown, many of the things that attracted the first wave of settlers, both residential and corporate, have changed dramatically. Growth turned an expanse of cheap land and houses into an expensive one. A low-density environment --- people now in their forties can still recall riding their horses through vast expanses --- has become crowded not only with homes, but apartments. Freeways which once seemed like magic throughways to the rest of the basin are now among the most congested in the nation.

As a result, today many Valley residents are clearly dissatisfied with the region. By the end of the 1990s, according to a recent Los Angeles Times poll, only 13% of residents considered the area an “excellent place” to live and only 9% considered it a good place to raise children. Perhaps most disturbingly, despite a strong economy, nearly twice as many believed life in their community had gotten worse than those who thought it had gotten better. Significantly, these disapproving numbers were considerably higher than those recorded by other “suburban” areas including Orange County, the San Gabriel Valley and neighboring Ventura.

Some of this alienation, particularly for the City of Los Angeles portions of the region, can be traced to a sense of political impotence. Even as independent cities such as Burbank and Glendale remained attractive to entrepreneurs and corporations --- even during the deep recession of the early 1990s, the majority of Valley residents, residing in the city of Los Angeles, paid a stiff price for being linked to downtown’s increasingly bloated political bureaucracy, who continued adding extra layers of costs and regulatory restraints on firms. One result was that the L.A. portion of the Valley, like the rest of the city, was slow to recover from the recession and has generally lagged the smaller, independent cities.

Finally, there was a dramatic change in the nature of Valley residents. Once a recipient of white flight from over the hill, the Valley now experienced its own out-migration, some of it to other states and some to surrounding areas. The white population of the Valley, for example, dropped by over 130,000, more than ten percent, between 1990 and 1998.

In their place has come a largely immigrant community who, much like the original settlers, migrated in search of a better quality of life and economic opportunity. In the 1950s the Valley was roughly 99% white; three decades later it was already 44% minority, with Latinos representing nearly one-third the total population. By 1997, according to County estimates, Latinos accounted for roughly 40% of the Valley population, while Asians account for another 10%. 

This reflects both the “suburban” aspirations, as well as family orientation, of many immigrants. In contrast to the early 20th Century immigrant, many of today’s newcomers stop only briefly, if at all, in the inner cities; their immediate destination after arrival is as likely Encino or Reseda as Fairfax or east Los Angeles. “The immigrants often don’t bother with the inner city anymore,” notes Cal State University Northridge demographer James Allen.

Yet sadly, not all Valley residents welcome such changes. For some, ethnic change also means the loss of long-cherished businesses, as ethnically-oriented shops take their place, and raises the prospect of such things as gangs in their communities. Also, the movement of a large population of poorer, non-English speaking children has put additional burdens on local schools, threatening the perceived quality of education for many traditional middle class residents. 

Other Editorials and Articles by Joel Kotkin: Grass Roots Business