Opinion: Mayor Seeks to Accelerate Technology Development in Irvine, but at What Cost to Our Quality of Life?

“Austin is the fastest-growing major metro area in America, having expanded by a third in the past ten years. It is already the eleventh-largest city. New jobs mop up newcomers as fast as they arrive. Every day, the metro area adds three hundred and fifty-five new residents, while two hundred and thirty-eight Austinites depart, many of them squeezed out by high rents and property taxes or by the disaffection so many of us feel because of the pace of change and the loss of qualities that once defined the city. Austin is now characterized by stifling traffic and unaffordable restaurants.” —Lawrence Wright

“Based on my efforts with the Innovation Council, we’ve developed the idea of establishing the Irvine Innovation Lab, a space where entrepreneurs can find a world-class ecosystem of support that will help facilitate the accelerated development of their business through the incubation period, all aimed at growing and retaining successful Irvine-based companies.”—Mayor Farrah Khan, Memo to City Manager Oliver Chi, March 5, 2023

“CerraCap Ventures is a top performing global venture capital firm which is deeply rooted in Orange County . . .. CerraCap Ventures is going to [be] focusing on the disruptive technologies and bringing some of the best talents, best technology, and innovation to the heart and the core of our city that we love and we call Irvine.”—Abhi Mukherjee, Operating Partner, CerraCap Ventures, speaking at Mayor’s press conference announcing the formation of Innovation Council, December 8, 2021

Item 5.2, on the agenda for the City Council’s Tuesday, March 28, regular meeting Mayor Khan’s proposal to direct staff to initiate lease negotiations for an “Innovation Lab” at the Irvine Transportation Center.

In her five-paragraph memo to City Manager Chi, Khan states: “When we establish this Innovation Lab, anyone in Irvine with a good idea and the willingness to put in the work will be able to access the space to gain business support resources, venture capital connections, legal support, and other relevant services.” She provides no details on how this would work, or how it would be determined what is a “good idea” or who is willing to “put in the work.” She does, however, state: “In order to bring the Innovation Lab to reality, we will need a space to operate out of. The City currently owns office and café space at the Irvine Train station totaling nearly 4,000 square feet. I am requesting that the City Council direct staff to engage my Innovation Council business executives in lease negotiations in order to establish the Innovation Lab.”

Khan does not identify the specific executives with whom she wants staff to negotiate. She does, however, say that those who would “help support and operate this venture” include “executives from Edwards Life Sciences, Masimo, Five Point, IRA Capital, Sunstone Management, and Octane.” Executives from some of these companies are known campaign contributors of Khan’s. According to its website, private equity firm IRA Capital has five co-founders/managing partners. In a clearly coordinated move, three of the five, Jay Ganwal, Amer Kasm and Samir Patel, each made legal maximum donations of $550 to Kahn’s re-election campaign on November 8, 2022—Election Day.  A fourth, Amer Malas, was a maximum donor to Khan’s 2020 campaign.

Khan’s claim of FivePoint participation may be based not on the company’s current management but on the personal involvement of its former CEO, Emile Haddad. Haddad sits on the executive committee and board of directors of another company listed by Khan, private equity firm Octane.  Serving with him is the co-founder of Octane, James Mazzo. Mazzo is a former defendant in an insider trading claim filed by the United States Securities and Exchange Commission (SEC).  The SEC alleged that while Mazzo was CEO of Advanced Medical Optics, Inc., he tipped information about his company’s acquisition to his close personal friend, former Angel’s third baseman Doug DeCinces. According to an SEC press release, “DeCinces also allegedly tipped five of his friends, including a former Baltimore Orioles teammate and a businessman, David L. Parker. DeCinces’s trading resulted in over $1.3 million in alleged ill-gotten gains, and the tippees obtained another $1 million in ill-gotten gains.” The press release, dated November 13, 2018, announced a settlement in which Mazzo agreed to a final judgment ordering him to pay a civil penalty of $1.5 million and barring him from serving as an officer or director for five years.

Innovation Council: An Extra-governmental Body Lacking in Transparency

Khan’s Innovation Council is an extra-governmental body similar to her unofficial Advisory Committee, which was a subject of controversy last year when it was revealed that its membership included Armenian Genocide deniers. The Innovation Council’s membership includes, among others, representatives from major corporations such as Microsoft and Google, venture capital and private equity firms,  and real estate developers FivePoint and Irvine Company. The full roster of organizations represented is depicted on the slide shown at the beginning of Khan’s press conference.

Like the Advisory Committee, the Innovation Council operates outside the Brown Act, which requires that local government agencies post notice of their meetings, including agendas, and provide an opportunity for members of the public to attend and comment. A search of the City’s website turned up nothing about the Innovation Council since the press conference announcing its formation more than 15 months ago. Given this lack of transparency and the vagueness of Khan’s memo to Chi, no details are currently available about how the proposed Innovation Lab would function, what its budget would be, or how it would be financed.

Tech Development’s Disruptive Impact on Quality of Life

When Abhi Mukherjee spoke of “disruptive technologies,” he invoked an adjective tech titans frequently embrace with pride. Tech’s disruptive role in the business world is obvious: Blockbuster Video stores, ubiquitous in strip malls across America less than twenty years ago, were rapidly rendered obsolete by streaming movies on Netflix and other providers. But the inescapable truth is that rapid tech development is equally disruptive to cities, their environmental quality, their traditions, their values, and their quality of life. As Lawrence Wright documented extensively in his New Yorker article, the Austin of generations past was an affordable, livable community with a vibrant live music and arts scene. The tech invasion brought devastating changes, displacing music venues, driving up housing costs and driving out musicians and artists, and creating urban sprawl and traffic jams.  Tech executives brought with them political ideologies at odds with Austin’s traditions and the power to impose those ideologies.

As Irvine endures a dire shortage of housing affordable to its workforce, there is ample evidence of the same forces in play locally. Khan’s press conference announcing her Innovation Council was live-streamed on Facebook.  Scott R. Hansen, then Khan’s appointee to the Transportation Commission and a 2022 City Council candidate, commented: “Corporations/businesses need affordable housing to attract hardest working, talented employees. In Irvine and also nearby cities in the region. Opportunity for Irvine’s needs and business community needs to align here.”  Although Hansen is himself a tech attorney and a loyal supporter of Khan, there is no evidence that she or anyone else involved in her project heeded his wisdom.

Those of us who have lived in the Bay Area in recent decades have witnessed first-hand the trends disrupting Austin that were documented by Wright.  An influx of tech capital and workers largely displaced the middle and working classes of Silicon Valley and San Francisco.  Teachers, nurses, firefighters, and other essential workers could no longer find housing within their means, and many small businesses were similarly displaced by rising rents.

Rupa Marya is a self-described “economic refugee of San Francisco” with dual careers as a physician and professor of medicine and as a globe-trotting musician.  (Full disclosure: She’s also a friend of mine.) Seven years ago, she wrote poignantly of the loss of a popular music venue and gathering spot, a casualty of the tech disruption of San Francisco:

“Conversations would strike up between unlikely folks…We were vibrating with a certain cultural evolution that only happens when people have time and space, and density to rub up against one another. We were teachers, artists, writers, social workers, librarians, janitors, doctors, students, musicians, seekers, dreamers, busboys, hairdressers, flight attendants, travelers, filmmakers, and wanderers. We were bilingual, trilingual, quadrilingual even. Highly unproductive. And pulsing with possibility…When newcomers in SF ask why people get so down on all the changes, I try to paint this picture that doesn’t exist anymore. The dust of it is there, like the dead skin that flakes off a living creature and settles into a shadow in the corner. But the living thing was evicted.”

For Marya, such changes are not to be passively accepted as inevitable but to be actively resisted:

“Thanks to capitalism, the rate of change of culture now does not let deep roots settle–anywhere. And this, around the world, is a relatively new phenomenon. That it is ubiquitous and touted as inevitable does not mean it must be that way.

“There was a time before ‘weekends.’ Someone had to agitate for it. The people who said ‘This is just the way things are’ to the lack of protection for labor’s rights were the inertia a movement had to work against.

“There is a fundamental right to remain that stands in the face of market pressure and the insatiable and unrealistic god of growth that people have felt on this peninsula since the Encounter on this land. It is incredible to me that we have internalized our own oppression instead of our right to remain.”

Who Wins? Who Loses?

Tech’s disruption creates winners and losers. It’s easy to identify some of the winners in Khan’s latest adventure in crony capitalism. Her venture capital and private equity friends stand to profit enormously from a matchmaking service that sets them up with entrepreneurs hungry for capital. A select group of attorneys, accountants, and other professionals facilitating the transactions would also stand to benefit. As for the entrepreneurs, a lucky few might hit the jackpot, while many others crash and burn.

Many local, established small businesses would be losers. Your hairdresser can no longer afford the rent and relocates to another city. Rising rents also displace the neighborhood boba shop, and your favorite Korean restaurant loses its lease to an upscale steakhouse chain catering to tech oligarchs.

Most of Irvine’s people would also be losers. Many would be driven into economic exile by unaffordable rents and home prices; others would experience a weakening of family ties as their children or parents move away to more affordable places. Friendships would be disrupted in the same manner.  Those who remain would experience a diminished quality of life, with ever-increasing traffic, income and wealth inequality, and homelessness.

None of this is speculation. It’s all happened before in Silicon Valley, San Francisco, Austin, and other tech hubs. There’s no basis for assuming a more favorable outcome for Irvine.

Make Your Voice Heard

If Khan’s proposal is to be entertained at all, details need to be provided on exactly how the Innovation Lab would function, and the environmental, social, and economic impacts on the community need to be thoroughly investigated. This is a fundamental policy issue that demands broad and extensive public input. Let the City Council know your thoughts by email, ecomment, or by public comment in person or via Zoom. Instructions are here.

Disclaimer: All opinions published by Irvine Watchdog are the personal opinions of the author and do not necessarily reflect the opinion of Irvine Watchdog or any of our other volunteers or contributors.