Reflections on El Segundo

There will be a somewhat higher publication volume from me over the next week (likely 2-3 posts, including this one). They’ll also all be a bit shorter than usual. I will resume to my regular weekly cadence thereafter. Also, I did a podcast with my friend and former colleague Aaron Renn. I think it turned out nicely.

DEAN BALL: The Age of Artificial Intelligence

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Keep that flame burnin' forever baby
Dream baby dream
Forever and ever
“Dream Baby Dream,” Suicide

The skyline of El Segundo, California is dominated by an oil refinery, currently owned by Chevron. The facility, along with a handful of others in the state, makes all of California’s gasoline, which is a special blend (called California Reformulated Gasoline) mandated by state law, made exclusively in California, and sold almost entirely within the state. Stringent regulation of these refineries by the state has driven smaller refineries out of business, resulting in consolidation to the largest players and higher prices for gasoline in the state. If you’ve ever wondered why gasoline is so much more expensive in California than it is elsewhere in America, this is an important part of the explanation.

After decades of regulatory fights with California’s government, Chevron announced last month that they will be relocating their headquarters to Texas. They may eventually close down or sell their California refineries, as well, owing to a combination of regulations, taxes, and fees that could make it impossible to profitably operate a refinery in California. The prospect is realistic enough that a committee convened by the Governor recently suggested a state takeover of the refineries. Whatever you think of fossil fuels and their impact on the environment, the whole story feels decidedly dated: a big, 20^th century administrative state feuding with a big, 20^th century industrialist—while consumers are left with little else but higher gasoline prices.

Yet within the City of El Segundo, a group of entrepreneurs is trying to write a new story. Inside nondescript warehouses, these entrepreneurs’ startups are putting that story together, piece by piece. And they really are assembling it: almost every startup in El Segundo, known by locals as the Gundo, is focused on the physical world: manufacturing airplane parts or hypersonic missiles or nuclear reactors. In the shadow of an icon of state-assisted industrial decline, a new story of industrial dynamism is being told. If you listen closely, you’ll hear a story of one version of America’s future. Here is what I heard on a recent trip.

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I’ve always believed that you can’t understand startups as mere business enterprises. You can’t even understand them purely based on technology, science, or engineering—though all of these things are essential. Instead, I often try to understand startups as works of art, encompassing aesthetics, philosophy, elbow grease, and profound statements about the direction our world is headed, or should be headed. The fusion of technology and business is, in my view, the preeminent 21^st century art form. I’ve previously compared, for example, the generalist models made by frontier AI companies to the grand symphonies of the Romantic period.

They’re not playing classical music in El Segundo, though. In the Gundo, they play punk rock. In many ways, the city’s startup scene—and it is a scene, reminiscent, in some ways, of what my father told be about his days at the New York City punk rock club CBGB in the 1970s—is a refutation of the contemporary Silicon Valley caricature. Indeed, it is a refutation of much of modern American elite culture.

Though political views vary considerably, there is little of the vaguely left-of-center virtue signaling that is a familiar part of American corporate life. Though computers and software enable almost every El Segundo startup, there is a distaste for affecting change purely in the digital world. Though deep knowledge is pervasive, there is a sense that mere knowledge work is no longer enough. I met someone who toiled for years in a New York finance job, became disaffected, and jumped off the conventional elite human capital train to go build things in the Gundo.

El Segundo’s startups—and similar startups elsewhere—call out to those dissatisfied by modern advanced capitalist life, saying, in essence, “There is another way.”

Manufacturing, in America and elsewhere, advances in a more staggered way than the consumer may imagine. We are used to smartphones that get better each year, or software that gets updated at least every month. And there are fields like semiconductor manufacturing where new facilities are under construction constantly to build the next generation of chips. But most factories do not change much after they are built. A machine shop built in the 1980s may have been state-of-the-art then, but there is a good chance—especially if it is in America—that it hasn’t changed much since. Think of all the technology that has been built in the intervening decades, and then imagine having to work every day without it—or, at best, with new technology inelegantly bolted on top of existing processes.

Some of the most astonishing things happening in El Segundo are not being accomplished from fancy-pants AI (though some are, and many others use “machine learning,” which is what we call AI methods after we have gotten used to them). An awful lot of it, though, is applying lessons from the last several decades of technology development—far faster computers, the internet, cloud computing, advanced software modeling—to manufacturing, all at once. Moreover, clever young minds are borrowing from the technologies that matured as they came of age and applying those technologies to new problems. The result is not an evolution; it is a leapfrog.

I saw this recombination happening again and again. Better LCDs, combined with advances in computational chemistry and some very clever engineering, can enable radically more flexible and cheaper ways to manufacture complex parts with high precision. Mid-century science to engineer rainfall, ahead of its time when it was first done, made newly possible with modern engineering. A set of easily deployable sensors that allow militaries to turn a real-world battlefield into something like a video game map (credit to Jason Carman of S3 for the analogy). A rocket engine, reimagined to turn plant matter into electricity and clean water. Like all great artists, the startups of El Segundo are profoundly eclectic.

Similarly, even though El Segundo is small, one can easily see the magic that makes cities so productive. Clustered together in just a handful of blocks, El Segundo has an energy akin to a college campus. Founders trade ideas, compare notes, use one another’s products, and, perhaps most importantly, share tight bonds of friendship. These benefits from being close together are what economists might call “urban agglomeration effects.” They’re what I call the fruits of an intellectual and industrial community.

It’s not all fun, though. As I was getting a tour of a startup’s factory, another founder realized he had forgotten his laptop at an event we attended earlier. It didn’t feel, to me, like a stop-the-presses moment. But it was. On his laptop were designs of a product that more than a few foreign adversaries would love to see. That’s when I remembered that, beneath the almost jockish energy of the place, the tectonic plates of history are moving in these factories.

This feels like the beginning of something—but does the US have what it takes to write the next chapters? The next chapters will be hard. They will involve reconfiguring our world, legally and culturally, to accommodate building at a new scale of ambition. They will probably involve letting old and legendary companies die. They will involve a willingness to take risks. They will involve being open to radically new ways of doing things, and rooting out path dependency. They will involve a level of seriousness we have not had to muster lately. I do not know if we have what it takes anymore, as a civilization, to write this novel. But I do know the promise is there, and ours to lose.

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Each Friday night in El Segundo, there is, famously, a bonfire on the beach. Really, there are many bonfires, because El Segundo happens to border a section of LA’s beach where bonfires are allowed. But the pillars of the El Segundo startup scene make it a ritual, and they take pride in having the biggest of the bonfires. Planes made by Boeing and Airbus, bound for LAX, roar overhead. Perhaps one day, a plane invented by an El Segundo startup will roar among them.

A lot has to go right for something like that to happen. There is an all-too-narrow path ahead—for these startups and, I fear, for our country. But being at the frontier—at the extreme boundary of what is possible in the free world, pushing forward each day—is the American condition, and the American burden. If we can continue pushing, something tells me that we’ll owe gratitude to the people who cooked up wonders here, in unremarkable warehouses beneath the shadow of our industrial past.

Thanks to Fil Aronshtein, Augustus Doricko, Zane Mountcastle, Cameron Schiller, Aeden Gasser-Brennan, Isaiah Taylor, Zach Graves, and others for showing me around town.