The defense and aerospace industries dominated San Diego’s economy for decades after World War II. General Dynamics was the region’s largest private employer, accounting for about 15 percent of the county’s workforce (with about 46,000 employees) in the early 1960s; its workers built commercial aircraft, Atlas rockets, and cruise missiles.
When General Dynamics began pulling up its stakes almost 25 years ago, the San Diego economy went into a tailspin, and local leaders focused on finding ways to diversify. Many smaller defense contractors shifted from manufacturing to the defense technologies that remained in high demand—especially military IT (which includes communications, computers, intelligence, surveillance, and reconnaissance). Some pursued similar opportunities in the commercial sector for wireless communications, IT, sensors, and systems integration. A small consulting company Linkabit, started by two UC San Diego professors, paved the way for San Diego to become the wireless center of the world. Similarly the founding of a successful biotech startup called Hybritech by UC San Diego professors became a paradigm in our efforts to broaden and diversify San Diego’s life sciences industry.
So what have we learned?
—Analyze what you do best and do that. During the recession that hit 25 years ago, San Diego decided to focus on commercializing discoveries from our local academic and research institutions. Local research institutes have expanded from 10 back then to 50 today. Michigan has great research institutions as well, so focus on them for inspired innovation.
—Don’t minimize the importance of small companies. You have to start somewhere. San Diego isn’t particularly well-known for its large corporations, but we are really good at starting hundreds of small high-tech, high-wage companies. Last year was not a great year for job creation anywhere, yet San Diego added 1,100 new technology-related jobs. And the salaries in those jobs are nearly twice the average wages in the area. I recommend a recent column on “Just Doing It” by Thomas Friedman in the New York Times.
—Cultivate technology clusters. In 2004, the Milken Institute published a report that ranked San Diego as the nation’s No. 1 biotech cluster. The report says “Clusters of existing and emerging science-based technologies are crucial factors in shaping the economic winners and losers of the first half of the 21st century. To create international comparative advantage in a knowledge-based economy, clustering innovative activity is imperative.”
—Collaborate. “Not-invented here” is not an acceptable culture. Institutions need to work with industry, industry needs to work with local government, and local government must be educated by all of the above. Sharing knowledge and experience in the startup phase helps everyone learn faster and provides a comparative advantage. There is plenty of opportunity to compete in the marketplace.
—Establish non-profit organizations like San Diego’s CONNECT. CONNECT was created by regional leaders in research, government and the private sector to support local entrepreneurship and technology innovation. We help connect entrepreneurs with the investors, lawyers, financial firms, and others they need to start high technology and life sciences companies. We help provide professional mentoring, and host events that are intended to educate and provide forums for discussion, and an impetus for working together.
[Editor’s note: To help launch Xconomy Detroit, we’ve queried our network of Xconomists and other innovation leaders around the country for their list of the most important things that entrepreneurs and innovators in Michigan can do to reinvigorate their regional economy.]
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