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Panel 4: New Faces of Californias Economy
ROSS DeVOL: Now I would like to turn the session over to Betsy Zeidman,
head of our Emerging Domestic Markets program, who will moderate this session.
BETSY ZEIDMAN: Thanks you. Hi. I am Betsy Zeidman, and I am delighted to
be here with a terrific panel.
Briefly, our Emerging Domestic Markets program looks at markets in this country
much as the way we look at markets overseas that are underdeveloped, undercapitalized
and therefore suffering slower growth.
In other countries, we see them as emerging markets, and we look at them as
investment opportunities. And too often in this country, we have looked at them and
said, cannot make any money why go there?
What we have done is look at these markets and say, lets look at the underlying
demographics; lets look at the fundamentals of the businesses; lets look at financial
innovations that can help grow these markets.
These markets may be place-based, such as inner cities or rural areas. They may
be people-based, such as minority-owned business or women-owned businesses; they
may be new kinds of products and concepts; they may serve new markets. There is a full
range of different ways to approach this. And California is the best place to be doing this
work because it is clearly the center of these new markets and that is clearly where the
growth in this country is going.
We have an interesting panel that will talk a bit about what the opportunities are,
what the challenges are, what they see in the future, how they are addressing these issues MILKEN INSTITUTE

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State of the State 2001
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Panel 4: New Faces of Californias Economy
in their businesses, how things have changed and how we can finance growth in these
markets, as a lead-in to our big financing panel following this.
Briefly, I am going to introduce the people on this panel. And then we will begin
to talk about it.
Starting on the far end, Alex Espinoza is President of California Capital Home
Loans. He is co-founder, with his brothers, of the parent company, California Capital
Communities. They founded California Capital Communities 20 years ago in the Inland
Empire. They were the first real estate company to target the Latino market and the first
real estate company to advertise on Spanish radio.
Today, the company includes a mortgage and direct lender, real estate
development and a realty company. They are in the Inland Empire and have moved into
Arizona. They have really been a pioneer in building the Latino homeowner community.
Next to him is Professor Bill Frey, who is a Senior Fellow at the Milken Institute
and a research scientist on the faculty of the Population Studies Center at the University
of Michigan. Bill tends to go to Michigan until it gets really cold in January, and then he
comes back to California. And we are always delighted to have him.
Bill is one of the leading demographers in this country. If you have read anything
in most of the papers when the Census came out the last time, you saw Bills name. He is
an expert in migration, population in metropolitan areas, and he has authored over 70
journals and articles.
Tom Ramirez, next to him, is the Executive Vice President of Global Marketing
for HerbalLife International of America. HerbalLife markets nutritional, weight MILKEN INSTITUTE

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State of the State 2001
November 6, 2001
Panel 4: New Faces of Californias Economy
management and personal care products in 51 countries worldwide. Most importantly,
today, they are a sponsor of the Conference and a sponsor of this panel and we thank
them.
Tom also has extensive business experience, including owning a manufacturing
firm at the moment, and has been a managing partner of a boutique LBO firm and served
on government commissions and trade commissions, including the 1997 California-
Mexico Trade Commission.
Next to him is Anita Stephens. Anita is General Partner of Opportunity Capital
Partners. This firm is over 30 years old. They are a private equity firm investing in early
and later stage expansion and acquisition companies in telecom, health care and
information technology. They place a particular focus on minority- and women-owned
firms, and they were a recipient of some of the money that came out of the California
Initiative that Phil Angelides mentioned at lunchtime.
Anita has worked in this field for a number of years. She was previously head of
a smaller fund of a similar type in Georgia, and she is on the board of several of
Opportunity Capitals portfolio companies, as well as Silicon Valley Community
Ventures and the National Association of Investment Companies the trade association
for private equity firms targeting the minority markets.
And finally, closest to me is Charles Woo, who is co-owner and CEO of Mega
Toys, a toy manufacturing import-export company based in downtown L.A., which was
one of the top 100 fastest-growing firms in Los Angeles and Minority Manufacturing
Firm of the Year, named by the City in 1999. MILKEN INSTITUTE

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State of the State 2001
November 6, 2001
Panel 4: New Faces of Californias Economy
He is also the current Chair of the L.A. Chamber of Commerce. He is its first
Asian-American Chair. He has previously been President of the Toy Association of
Southern California, The Workforce Investment Board of L.A. and a number of other
L.A. boards and commissions. He recently served on the Mayors Task Force on the
Economic Impacts of Terrorism.
So I am delighted to have you all here. We will start by having Bill give us a little
overview of the demographic patterns that we see in California and the U.S., and that can
frame the conversation that will follow.
BILL FREY: Well, thank you, Betsy.
This seems to be the year of the demographer. And unfortunately, demographers
are never thought of as being wild and crazy and charismatic people.
I was reminded of this a couple of months ago, when someone asked me to
discuss the new Census results for a radio program. The producer called me, a young
woman called me and said, Well, we need a demographer, but we also need someone
who is lively and engaging.
And I said, you know, Couldnt that be the same person?
And she said, Oh, no. We have been laughing about this all morning.
So I am going to be the demographer, and the other panelists will be lively and
engaging, as I sort of give you a little bit of an overview of some of the demographic
changes that have been occurring not only in California, but in the nation as a whole. MILKEN INSTITUTE

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State of the State 2001
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Panel 4: New Faces of Californias Economy
And I think it is important to keep California in context. And the first slide that
you are seeing there are really the fastest-growing states that came right out of the gate in
the 2000 Census. And California is not one of them.
California has gained the most people in the aggregate of all the states. But in
terms of growth rates, it is not really on the cutting edge anymore.
If you can turn to the next slide, please.
I like to make a distinction between the old Sun Belt and the new Sun Belt. And
the Sun Belt is always the places people in the North say they are going to move to. And
in the past, those places used to be California and Texas and Florida. But the new Sun
Belt the places that are growing the fastest now are states in the Southeast, like the
Carolinas and Georgia, and in the Western states surrounding California.
And the distinction I want to make between the new Sun Belt and the old Sun Belt
is the new Sun Belt is gaining mostly from domestic migrants people moving there
from other parts of the United States. In the East, largely from the New York area; but in
the West, largely from California.
The old Sun Belt states California, I would include Texas and Florida are
states that are not growing as fast anymore. And a good share of the growth of these
states and in California, most of the growth in these states, in California, most of the
growth is from immigration. And California is very distinct from the rest of the
country, and that is going to be the main message I want to leave you with from this short
presentation.
Can you put on the next slide, please? MILKEN INSTITUTE

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State of the State 2001
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Panel 4: New Faces of Californias Economy
California still leads all states in the number of immigrants that it gets.
Somewhere between 25 and 30 percent of the nations immigrants still come to
California.
And the next slide.
On the other hand, during the 1990s the next slide, please California is
shown to be the biggest loser of domestic migrants. Now that is not likely to be a long-
term phenomenon.
And if you put on the next slide, you will see that over the 90s, that top red line is
the level of immigration to California over the 90s. And the bottom line the negative
line is in domestic out-migration. The big hit was in the early part of the 90s, with
the recession and the defense cutbacks and all of those kinds of things.
It has come back. And in fact, the people in the state of Californias Demography
Office actually think it is positive, at this point.
But the long-term projection for California is going to be an immigrant-driven
demographic growth. The people who are coming back to California now tend to be
high-end people people that have college degrees or higher; people working in the
knowledge-based industries in this state. But for the most part, Californias growth is
going to be from immigration.
Next slide, please.
And you will see, over the 90s, if you contrast California with the rest of the