Explaining Southern California's economy

California economy: When is a recovery not a recovery?

The UCLA Anderson Forecast, covering the fourth quarter of 2011 and looking forward through the fourth quarter of 2013, came out yesterday. KPCC's Brian Watt provided a report on air, and now I've had a chance to dig into at least some of the forecast. I'll start with the California section, presented by Anderson Forecast economist Jerry Nickelsburg. 

You'll remember that in the previous Anderson Forecast, Nickelsburg explained that California has broken into two distinctive economic regions: a recovering coast and a stagnating inland zone. Here's how I put it in the post I wrote back in September:

Since the financial crisis, two California economies have emerged. On the coast, there's growth. Inland, there's near-stagnation. You can easily see this expressed in the Los Angeles region's unemployment numbers. LA is bad, at at 12.7 percent. But Riverside and San Bernadino counties are far worse, at 15.1 and 14.3, respectively.

The industries that are creating jobs in California are also disproportionately located on the coast. Inland, the blast wave of the the housing bust is still being felt, with industries like construction shedding jobs.


A conversation with Michael Rossi at Drucker Day

The video above is my conversation with Michael Rossi, whom Gov. Jerry Brown asked earlier this year to serve as Senior Advisor for Jobs and Business Development. Rossi's is an impressive guy with a formidable background in banking and business. During the course of our talk, which took place last month at the Peter F. Drucker and Masatoshi Ito Graduate School of Management at the Claremont Graduate University, we discussed the California jobs crisis, Rossi's personal story, and some of his ideas for how California can — and will — remain competitive in the 21st century.

Be sure to take note of the moment when Rossi asks the audience what was the best infrastructure investment California ever made. The answer (hint: it's not a bridge or highway) says a lot about his priorities and what he believes is necessary to become a successful individual.


Building a business, one family member at a time

Last night, KPCC presented a really terrific panel discussion at the Crawford Family Forum, "All in the Familia: L.A. Latino Business in the 21st Century," moderated by my blogging colleague Leslie Berestein Rojas. The four panelists — and their extended families — represented four well-known LA-region family businesses: Portos Bakery & Cafe, Gaviña Gourmet Coffee, Guelaguetza Restaurante, and Tapatio Hot Sauce.

I've heard plenty of discussions about business, but this one was special. Business leaders, even family business leaders, are usually more than happy to talk about how they built their enterprises. But they don't usually talk about the process in such moving, personal ways. 

I think everyone who aspires to start a company, in any industry, should listen to what the panelists have to say. And, lo, they can. The CFF team has made the panel's conversation available online. Check it out!


Is the California lottery's $100 million jackpot worth a shot?

The California lottery's Mega Millions jackpot is up to $100 million (Mega-Millions is actually a multi-state lottery, an aggregate of 42 lotteries). That's a pretty nice chunk of change and should bring out many more players, even infrequent ones — and even ones who never play. What we're talking about here are the people who understand the odds against winning. So why would they change their minds, simply because the jackpot has crossed a threshold?

For starters, you have to understand why these folks don't play. The site Strange Loops explains:

Odds of winning big are less than the ratio of ticket cost to amount won. If $1 has a 1 in 1-billion chance of netting you 500 million dollars, it’s a really bad deal. Why?

Let’s say you could play the lottery over and over and over again an unlimited number of times. After a trillion plays, on average you’d win about 1000 times (roughly once every billion draws). That’s 1000 x $500 million = $500 billion won, but you’ve spent a trillion ($1000 billion) to play. So you’ve wasted a lot of money in the long run. Even if the chances of winning are closer to the cost and win amount ratio, if the odds are lower than the cost and win amount ratio, then it’s generally a bad deal.

So traditional economics says not to play the lottery.


James Altucher: A financial pundit who's worth watching

James Altucher is a crazy guy with a crazy blog who has some fairly offbeat ideas about all manner of stuff. He's also one of the most original talking heads in the financial talking heads business, as evinced by his appearances in a variety of media outlets. He seriously cuts against type. He still looks like the science-wonk he was as an undergrad and doesn't particularly mind functioning as mild comic relief, especially given that he's been around the money game for years and can talk the talk quite well.

Personally, I like it when he goes up against the rough-and-tumble panel on CNBC's "Fast Money," typically with positions so contrarian — and of late, so optimistic — that he seems to have the fellas on the point of cracking up with every prognostication. 

Currently, he's arguing that things are much better than they seem, economy-wise, in the U.S. To him, stocks look cheap and a meltdown in Europe would be no big deal. He may be right. But he also thinks Apple will see a trillion dollar market cap, something like three times its current level of about $360 billion.