California's Government Reform Angel

In America's business world, an angel investor, also just called angel, is generally a wealthy individual who provides capital and strategic planning advice for a promising business start-up, usually in exchange for different types of equity securities, giving the investor a significant ownership interest in the start-up. In this post I want to discuss a different type of angel, one who is providing capital and advice with the noble and highly ambitious objective of successfully reforming California's dysfunctional state government.

The little known and unlikely angel's name is Nicolas Berggruen, 49, a French born businessman whose net worth has been estimated by Forbes magazine at $2.2 billion, primarily earned from investments in a number of very different businesses, including a hedge fund management company, a leveraged buy-out company, windmill farms in Turkey, a large newspaper publishing firm in Spain, and a failing German department store group he took over earlier this year. He seems to be a very eccentric fellow, reportedly owning no home and no car, but travelling around the world in his own plane and living in fancy hotels.

What's his connection to the U. S. and California? Well, he got a degree in finance and international business from New York University. In his younger days he was employed by some American companies. He's a member of the Young Presidents' Organization, the global network of chief executive officers originally started in the U. S. He sits on the board of several major museums, including LACMA in Los Angeles and the Museum of Modern Art in New York. Berggruen came more into the public eye recently when he contributed $250,000 to oppose California's Proposition 23 that seeks to suspend the landmark global warming law. He has founded an independent non-partisan think tank and consultancy, the Nicolas Berggruen Institute (NBI), based in New York, dedicated to exploring new ideas for good governance suited to the new and complex challenges most governments, including California, are now facing.

Berggruen decided that California's government would be a worthy volunteer assignment for NBI and a few days ago announced that he was forming a high profile group he named Think Long Committee for California to work on pragmatic, non-partisan plans to fix the state government. The Committee's first meeting took place two days ago on the campus of Google hosted by one of its members, CEO Eric Schmidt, with Governor Arnold Schwarzenegger as a guest. Notable among the other Committee members are former secretaries of State George Schultz and Condoleezza Rice, former Assembly speakers Willie Brown and Bob Hertzberg, former governor Gray Davis, former state treasurer Matt Fong, developer and philanthropist Eli Broad, and partner of the investment firm TGP Capital, David Bonderman.

Berggruen has committed at least $20 million for the Committee to get this project off the ground. He's indicated he envisions a California government that is competent, flexible and efficient, able to close the innovation and entrepreneurship gap that is emerging between California and places like Singapore and China, and has emphasized the importance of thinking long-term. He has apparently given the Committee six months to come up with their report and specific recommendations for implementation.

There have been some other recent unsuccessful non-government efforts to try to reform California's government. One involved organizers for a state constitutional convention which had to be abandoned because they didn't have enough funds. Another major effort was made by a think tank, California Forward, a political organization created in 2006, that was advocating for a package of statewide propositions to be put on the ballot for next week's elections. Impressively the effort was encouraged by several socio-political groups and supported by $16 million in donations from five major foundations. Hertzberg has been a co-chair of California Forward. However, the think tank lost momentum when Sacramento legislators balked at its plans and surprisingly nobody, apparently including the foundations, stepped forward to provide the extra funding needed to put the group's proposals before the voters.

It obviously won't be easy for Berggruen and Think Long Committee for California to succeed, given the degree of dysfunction involved and expected resistance from the Legislature, the public employee unions, lobbyists and other special interests. However, he has assembled a very experienced and talented group with deep knowledge of California politics and strong private sector business management and finance skills. With Berggruen's financial resources and possible access to additional resources from Broad and some of the other well-to-do members, and perhaps also the five big foundations that supported California Forward, they should have adequate funding.

It's hard to understand why it should take someone like Berggruen, from France (and homeless!), to organize a serious independent effort to fix California's government, but I think it has a fair chance to succeed. As long as the Committee members work together cooperatively on a non-partisan basis, they will most probably come up with a viable report with sound recommendations. The public is certainly ready for prudent reform and for the most part will support the effort. The prime challenges will be in overcoming the resistance from political opponents and those who will be adversely impacted financially, and, of course, gaining final legislative approval.

I would hope and expect that our new governor, whether Meg Whitman or Jerry Brown, would also support the Committee's non-partisan recommendations and would urge the Committee to invite the new governor to one of their upcoming meetings. Thank you Mr. Berggruen for your initiative and generosity. Bon voyage!