L.A.'s Greatest Failure: It Doesn't Trumpet Itself.

Los Angeles enters the new millennium like an addict who has taken the cure but is not quite trusted with the keys to the pharmacy. Following the disasters of the early '90s, the region's economy has recovered nicely, yet it remains only a minor presence in the boom-time landscape of incipient 21st century America.

Nearly 100 years after taking command of the movie industry, Southern California has failed to build a narrative about itself as anything other than a disaster-prone 'place where the silliness industry somehow thrives. As one New York editor told me recently. "It's still basically seen as Tinseltown back here."

This constitutes L.A.'s greatest failing in the last decade of the millennium. An upstart that entered the 20th century dreaming of global preeminence has squandered its many accomplishments by ceding its image to. those -- largely in New York and the Bay Area -- who would love to see the city turn into a smoldering ruin or have the Continental Shelf start, say, around Barstow.

Changing that perception may well be among the greatest challenges facing Los Angeles in the next millennium. This is not a trivial matter. Until it can command respect nationally and internationally, Los Angeles will always have to work twice as hard to gain the same amount of investment capital. Its companies will always trail rivals elsewhere in recruiting good people or getting good press.

Perhaps most important, in the emerging digital economy, is where CEOs choose to locate. Given that companies and talented individuals can go anywhere, why should a brilliant Web designer from the frigid plains of central Illinois relocate to L.A.? If all he or she knows about the place is Rodney King, the chances are slight indeed.

Strengths are blah, blah, blah

Of course, one can counter with statistics showing that Los Angeles is anything but a backwater. It's the leading port, possesses the largest garment industry, arguably has become an equal to New York in the creative arts, and ranks in the top echelon of technology regions. Yet for most of the country -- and for many Angelenos -- all this is so much blah, blah, blah.

The facts are like Sartre's tree in the forest: If no one sees them fall, no one knows any better.

All too-often, it-boils down to perception. In the late '90s, Los Angeles began to recover smartly from the recession. It did so faster, and more broadly, then did New York, despite the catastrophes earlier in the decade. Yet check your Nexis-Lexis for accounts of L.A.'s recovery as opposed to Gotham's. Newsweek chronicles those mayors leading the urban recovery -- Guiliani on the cover and Riordan not even mentioned (although the New York-based editors found room to praise dubious achievers like Philadelphia's Ed Rendell and the mayors of such renowned garden spots as Buffalo, N.Y. and Gary, Lad.).

A classic case of disproportionate coverage can be seen in the burgeoning dot-com economy. Read accounts of this industry in any of the major national media and you'll hear plenty about Silicon Valley, Silicon Alley, Seattle, Austin and a host of other "hot centers." Yet Los Angeles, which by most measurements has an array of Internet firms surpassed only by the Bay Area, gets nary a mention.

It's easy of course to blame this on the nefarious New Yorkers. A lot also has to do with the rising power of the Bay Area, which has developed a booster media tied to technology that would embarrass even the most promotion-minded Gotharnite publicist.

But much of the blame lies closer to home. When the dot-com economy was young, back in the dark ages of 1995 and 1996, L.A.'s major media decided to all but ignore the infant Laternet industry here. Two of the reporters covering the industry for the Los Angeles Times, for example, seemed to go out of their way to belittle or de-emphasize the local players (neither are with the Times anymore, nor are they even based in L.A.). If L.A.-based reporters for national papers or magazines didn't see coverage of the Internet firms in the local papers, they had no reason to think it existed. So Los Angeles essentially fell off the digital map.

'A kind of snobbery'

Did this matter? You bet it did, and still does. Perhaps no industry is more tied to perception than dot-coms. Media accounts portray favorites like New York, Seattle and San Francisco as the places to make Internet fortunes. You don't think that has an effect on young people seeking theirs?

It's not just the wet-behind-the-ears crowd who are susceptible to hype. In many cases, venture capitalists steered clear of L.A. or, if they invested in a firm here, they suggested, as in the case of Pets.Com, that the dot-com company move to somewhere like the Silicon Valley. But proximity to high tech does not fully explain the pattern, notes Milken Institute researcher Ross DeVol, because many of these same VCs proudly invest in companies farther away from Silicon Valley.

"It's a kind of snobbery," suggests DeVol. "It's, acceptable for a VC to say. 'I'm in Austin, Raleigh or Seattle.' It's just not OK to do it in L.A."

It is true that Los Angeles has come back into the digital world, mostly on the back of locally driven capitalists like Bill Gross, entrepreneurs like Sky Dayton and, in just the past year or so, concentrated coverage in the local press. Yet still, Los Angeles remains far behind in the perceptual race for leadership in arguably one of the defining industries of the next century - still an afterthought, like an Atlanta or Chicago, in the digital sweepstakes.

To get itself back on the inside track, Los Angeles needs to take several steps, none of which our current business and political leadership seems yet to fully understand. Unlike other regions, Los Angeles needs to construct a story, a narrative about what role it wants to play in the next century. Seattle wants to be the Pacific Century high-tech center. The Bay Area sees itself as the techno-media hub of the world. New York envisions itself as remaining "capital of the world."

These visions are not casually projected. They take the work of powerful forces - publicists like Howard Rubinstein in New York or Regis McKenna in Silicon Valley. They also require media that like where they live and a university elite that identifies with their surrounding community.

The ultimate answer, not surprisingly, is straight out of Hollywood: Get a good story and execute it. And there is a good story here, even a great one, if we can find the guts to do something about it.

Take nothing, make it something

What is the narrative? It's about what L.A. has always been about -- imagination. After all, as the Bay Area folks and the New Yorkers always remind us, Los Angeles should not exist. It was, as one writer noted, "conjured into existence." Los Angeles is a product of willful imagination, a desire to make something where there is nothing, and the ability then to carry it out.

This is the essence of the emerging "knowledge value" economy. You take nothing -- a dot-com concept, a silhouette on a sheet of paper, the idea for a movie or a video game -- and you make it happen. Increasingly this involves a marriage of technology and art; the "soft" industries and the "hard." Call it the techno-cultural complex.

Los Angeles is perfectly suited for this new conjunction. Along with New York, it has the largest collection of artists in the nation. Go to Web companies and you'll find they are filled with graduates not just of engineering schools but of art colleges. (By contrast, the Bay Area, for all its vaunted sophistication, is culturally a third-tier city -- a New York wannabe without the moxie, and too obsessed with its self image.)

The region also has arguably the deepest design community in the country. Although often dismissed, L.A.'s fashion industry dominates in the sportswear sector. We design more cutting-edge furniture and cars and make more video commercials than anyplace in the country. In movies and television, we have no real competitors, with four times the employment base of second-place New York.

At the same time, L.A. has a technological infrastructure far larger than any other region, with the possible exception of the Bay Area. It has more high-tech workers than San Jose and Boston and more than twice as many as New York. It has more scientists and engineers than either Texas or New York -- and more than the Bay Area. The "rocket scientists" actually live here. Caltech, USC and UCLA are first rung in computers, engineering and other "hard" sciences.

Since 1995, according to Milken Institute's DeVol, L.A. has been outpacing the country in high-tech growth. Santa Monica, Pasadena and the northwest fringe of the San Fernando Valley are all showing signs of rapid growth in everything from the Internet to the biosciences.

It takes leadership

Yet having these assets is not enough. To construct a narrative, and make it stick, takes self-confidence and leadership. Just think of the Lakers before Phil Jackson showed up. Lots of talent running around, looking spectacular and getting crushed by boring guys from Salt Lake City. Los Angeles needs more Phil Jacksons, indeed a culture of Phil Jacksons: people who can run the offense and play defense, too.

That's why we have to pay attention to developing a civic culture. In the '90s, the L.A. establishment pretty much ran for cover as designated gurus like UCLA's Larry Kimbell predicted rolling disasters into the 21st century. They followed California Chamber of Commerce President Woody Godbold in his hegira to Utah. Only a few voices -- like economist David Friedman, Linda Griego and, to give him credit, Dick Riordan -- thought the place had a future. Now even UCLA is talking about the "dynamic recovery."

Yet still we are entering a period fraught with opportunity and potential disaster. We have the rise of a powerful and potentially dominant ethnic group, Latinos, who come to the table with strong family, work and entrepreneurial values. At the same time, we have a talented and large self-financed business elite, much of it Jewish and Asian, who lack the numbers to control the streets or ultimately the ballot boxes but, to date, still remain in the region.

Marrying these two forces is essential. A new post-WASP, post-aerospace era business leadership is building the basis for the new techno-cultural -complex - Al Mann building bio-science parks, Tom Gilmore refurbishing downtown L.A., Bill Gross's Idealab and its imitators spouting dot-coms. The question is, will the emerging Latino majority, which itself is marrying itself into the rest of the population, find common cause with these dreamers or feel itself alienated and apart from it? You can't build a future-oriented narrative if the rising political culture chooses the politics of victimization over that of opportunity.

The truth is that the business elites need the Latinos as workers, customers and good citizens. The Latinos, including their own rising business class, must have a strong economy to advance either into the middle class or the upper echelons. Class war and ethnic conflict in the digital age means disaster for everyone, because companies and critical talent can always go elsewhere.

Lacking sense of pride

Ultimately, building a great city is about finding ways to establish this sense of civic commonality. In New York, even ghetto kids wear Yankee hats and think Donald Trump is cool. Talk to a cab driver in San Jose and he will tell you about the time he took the "Yahoo kids" to the airport. In these places there is a sense of pride. Until L.A. gets some, it's going to be hard - to establish a sense of a shared geography.

In the last decades of the 20th century, not taking advantage of the opportunity to construct this common identity represented L.A.'s greatest failure. It failed largely because of a congenital over-dependence on defense work, as well as an inability to control the police and understand racial politics. That L.A. went down in flames and will never come back.

Yet out of these disasters, the potential remains for Los Angeles to reach its potential as a center of the new economy. Besides the concentrations of creativity, technology and immigrant energy, the city's greatest assets are still the basic ones - even the weather. And thanks to the region's steadily improving air quality, we can now better appreciate one of the most spectacular geographies in God's designing.

As the new millennium begins, this benefice has not been repealed. Nor has the battle for preeminence in the techno-cultural economy been won or lost by anyone. In fact, it's barely begun. So let's not weep about our lost opportunities but instead seize the opportunity by putting our shoulders to the wheel.

Business Journal columnist Joel Kotkin is a senior fellow with the Pepperdine Institute for Public Policy and a research fellow at the Reason Public Policy Institute.