Why California Will Make It!

California has its share of problems at this time. It has to somehow fix its state budget mess, its Governor may be ousted, many companies continue to migrate across the state line, its highways remain too clogged with cars and people, and many other things. Are these problems insurmountable? Only time will tell.

I read a recent article spewing the same old "yada yada" about economic doom and despair and felt compelled to offer my perspective of California's situation.

My firm has worked steadily over the past three years on a series of economic development strategies in California. I have not given up on the "promise" or the "performance" of California's complex economy.

Despite the state's many business and economic losses over the years, the California economy continues to grow by leaps and bounds. How can that be? My theory is that this is a pure example of how to convert "churn" into opportunity. It may be some of the best alchemy we will ever see in economic development. If any state can turn lead into gold, it's California. Why would I make this statement? Read on.

Much of what we do in economic development miscasts how complex economic systems function. We talk about competitive advantage, competing for deals, streamlining development processes and systems, lowering costs, reducing confusion and lots of other things. All these notions reinforce a "static" view of economic systems. They fail to capture the reality of change and the essential role of "churn" in creating new opportunities.

The economist Joseph Schumpeter had it right with his notion of "creative destruction." The idea is very consistent with a new book I just finished called: "Stuff Happens (and then you fix it!)" by John Alston and Lloyd Thaxton. Stuff does happen and churn is the natural state of both Nature and economic systems. I do not subscribe to the equilibrium theory of economics. There is no such thing as steady state. California's got churn! This is a place that actually understands that death is a part of life. As long as it continues to apply this principle to economic life, California will continue to generate more opportunities than it loses.

California is a growth engine for this nation and the world economy. It creates opportunities not only for itself, but for others. That is what growth is all about. And that is a lesson for all of us to learn from California. By the way, many Californians need to learn this same lesson from their own experience.