What’s Next? Blue Economy, ‘New Space’

April 22, 2020

By Jonathan Woetzel and Michael H. Kelly

An “innovation cluster” of researchers and startups is starting to form in long underutilized warehouses at the Port of Los Angeles, in pursuit of the idea that the planet’s oceans have the answers to some of mankind’s most perplexing challenges.  Aquaculture, algae fuels, and robotic exploration of the unmapped depths are the focus of an emerging “blue economy” that has the potential to provide sustainable solutions to long-range environmental concerns, along with tens of thousands of middle-class jobs.

The nascent epicenter of this emerging new economy is AltaSea, a non-profit organization that has begun the development of an ocean research and development campus on 35 acres at the long underused City Dock 1.  The project has L.A. looking to the future as political discussions about income inequality and the plight of the middle class continue to be mired in the idea of somehow turning back the clock to restore well-paying jobs connected to coal, steel, oil and the manufacture of high-polluting vehicles.  We are instead embracing the resurgence of manufacturing jobs based on the blue “ocean” economy that AltaSea is pioneering, and the booming “blue sky” economy linked to the growth of private initiatives in aerospace – the SpaceX generation.

These nascent sectors show great promise in providing pathways to middle-class wages linked to skilled manufacturing, not just technology, with a larger mission of serving, even saving, the planet. We’re seeing the possibilities already with the resurrection of aerospace –an unexpected third act in a fraught regional story. 

Starting in the 1930s, companies such as Douglas Aircraft, Lockheed, and North American Aviation established operations in and around L.A. because of the region’s large labor pool and mild weather, which is ideal for flight-testing aircraft.  At the height of the Cold War, 15 of the 25 largest aerospace companies in the United States were located in Southern California.  By 1990, 1 in 10 U.S. aerospace jobs were located in L.A., providing a key source of upward mobility.  But as Pentagon spending slumped later that decade, aerospace moved elsewhere. 

At the same time, national ambitions and budgets for space exploration shrank. What remained, though, was a landscape with the entire equation of human space flight in its DNA.  Entrepreneurs were quick to see the potential in the early 2000s, and private and public companies now sit alongside each other, employing the region’s legacy aerospace assets to push the boundaries of commercial space activity. 

The “New Space” industry, which has attracted hundreds of millions of venture capital dollars, is expected to be worth $600 billion by 2030 and more than 70 aerospace firms are now located at the Mojave Air and Space Port at the northern border of L.A. County.  At the southern end, SpaceX recently signed a long-term lease at the Port of L.A., just across a harbor channel from AltaSea, to begin rocket development work there.

These activities are fueled by a desire to explore and develop ways for humans to live and work in space, but the New Space economy has more present-day applications.  Some of the industry’s startups are developing smaller, lower-earth satellites that are already providing higher-speed Internet access and GPS tracking, generating data that can be used to manage natural resources, measure agricultural yields, or aid first responders after natural disasters.  During the recent California wildfires, firefighters relied on data from these new satellites to better estimate hot spots and predict what direction the fire may turn.

There is no doubt lives and homes were saved in the process.  Overall, the number of jobs being created to launch these and various other projects is exceeding forecasts, and when viewed in combination with job “replacement” as workers retire (30.5 percent of aerospace workers are over the age of 50) or change jobs, there is great opportunity for residents who are gaining the needed skills. Entry-level electrical engineers earn $75,000 to $80,000, according to Aviation Week data. Entry-level software engineers in aerospace and defense make about $76,000. 

Raytheon had about 600 job openings in the South Bay as of last month, and Northrop Grumman plans to add more than 2,000 jobs in the region by late next year.  The L.A. space industry has created more than 6,000 jobs in the past decade, with an average wage of over $100,000, linked to the production of unmanned space vehicles.

At the same time, projections are rosy for jobs linked to ocean exploration, whose presence alongside aerospace in the nascent Blue Economy is no accident. Aerospace entities are among the anchor tenants at AltaSea, repurposing space vehicles as advanced underwater robotic probes. This work is already spawning industries of the future, such as ocean robotics, mobile sensing, and offshore renewable energy – and producing a spectrum of jobs from low-wage assembly to advanced manufacturing to high paying white collar jobs.  

By 2025, the entrepreneur and author Gunter Paul estimates, the oceanic Blue Economy could create 100 million new jobs worldwide based on hundreds of innovations, as well as empower people and sustain communities.  A split between rising wealth and deepening poverty should no longer be the storyline of L.A. and these nascent Blue Economy ventures offer genuine hope for not only L.A., but our nation and its workers.

Rising wealth and deepening poverty should no longer be the storyline of L.A. and these nascent Blue ventures offer genuine hope for not only L.A., but our nation and its workers.  Now it is up to the public and private sectors to up their bets on a vision that could have been scripted by Jules Verne and Carl Sagan.  Then, and only then, will our struggling middle class find a Hollywood ending.

Jonathan Woetzel is a senior partner at McKinsey & Co.; Michael H. Kelly is executive director of the Los Angeles Coalition for the Economy & Jobs and a trustee of AltaSea at the Port of L.A.

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