Follow the Money

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How to explain California – and Los Angeles?

The latest Cost of Doing Business survey from consultant Larry Kosmont and the Rose Institute at Claremont McKenna College told us what we really should have expected: it’s expensive to do business here. Eight L.A. cities were among the 20 most expensive in the Western U.S.

Taxes are high, the cost of living is high, housing is prohibitively expensive, entry-level wages are on the rise (good for workers, less so for business owners), the regulatory environment can be onerous at times.

And yet they keep coming.

There is something in the alchemy of the regional economy – perhaps the mix of top-flight educational institutions, critical clusters of media and technology companies, and, oh, decent weather – that inoculates many business owners from those stumbling blocks Kosmont-Rose identified.

To be sure, we lose businesses. Coffee roaster Farmer Bros. left for Texas not that long ago, and the aerospace industry here is not what it once was (though it’s worth noting that Boeing Co. last week said it would move 1,600 jobs into Los Angeles County).

But there are also small businesses drawn to the opportunity that comes in a county of 10 million people representing every possible walk of life.

Banker Supply Co.’s founders came to Los Angeles from Pittsburgh because they wanted to launch a concept for a cycle shop in a bigger city, and in their world, at least, ridership here was far deeper than in New York. So yes, it’s more expensive here than in Pittsburgh. But the market is so much deeper and diverse that Banker’s principals believe they can more than make up for that.

They are clearly not alone.

And things are about to get a little more interesting. Snap Inc., parent of social media darling Snapchat, is set to go public early next year at a valuation of about $25 billion. It would be an offering that would flood the market with new wealth that, in time, will start, fund, and acquire more local businesses.

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