By David M. Greenwald
Over the last few years, the narrative in the media has been one of a mass exodus out of California—leading the way has been talk of a “mass tech exodus.”
Max Taves in the Sacramento Bee: “Many in the media predicted last year that California’s economy would be smote by Texas.”
He reminds us of some key headlines from last year.
For example, in January 2021, after Oracle and Hewlett Packard Enterprise announced the relocation of their headquarters from Silicon Valley to Texas, NBC News ran the headline: “Tech flight: Why Silicon Valley is heading to Miami and Austin.” The piece quoted an analyst who predicted that the “mini-exodus of tech companies leaving the Valley” would “accelerate in 2021.”
Moreover, after Digital Realty announced it was moving from San Francisco to Austin, SFGATE reported: “In mass tech exodus, yet another firm is leaving the Bay Area for Texas.”
Next there was Elon Musk’s anti-California bashing, covered in the Independent, which ran the headline: “Texit: Why high-tech giants are fleeing Silicon Valley for Texas.”
A report from Stanford’s Hoover Institution. Authored by senior fellow Lee Ohanian and Joseph Vranich. He notes that Vranich is “an ex-lobbyist who runs a Texas-based business focused on persuading companies to relocate to Texas” and charges, “the 45-page report reads as expected: like a co-production of a partisan ideologue masquerading as a serious analyst behind cherry-picked data and a Texas business relocation specialist promoting demand for his services relocating companies to Texas.”
“These data show California has clearly lost the incredible dynamism that it once had and is now among the worst states in the country for economic investment,” Ohanian and Vranich asserted. “Texas has become the new California, and California is becoming the new Rust Belt, losing businesses and people to states that offer more opportunities and a better, more affordable life.”
Taves disagrees that life in Texas is better than in California, although I’m a bit skeptical of the stats he cites.
More importantly, California, despite the housing crisis, despite the pandemic, has actually fared pretty well.
Taves notes, “In 2021, California created 261,000 more jobs than Texas. California attracted $145 billion more venture capital than Texas. Californians attracted $3,911 per person; Texans, only $364. Far from dying last year, California’s tech industry raised more money than any year on record.”
That’s a critical bottom line.
He continued: “Sadly, the uncritical aping of this erroneous economic narrative reflects not only reporters’ gullibility but also their utility for conservative ideologues and corporate lobbyists, who score political points and regulatory concessions by spreading a spurious story line about California’s decline. Don’t expect facts to change this. Reporters need a plot twist, and conservatives need California to lose.”
But of course from my perspective, there is always a critical local angle here.
We’ve previously reported on the exploding life sciences scene in the Greater Sacramento area. Earlier this year, Michelle Willard from Greater Sacramento, told the Vanguard that there is a huge potential for life sciences in the Sacramento Region and that is centered around Davis and UC Davis.
As indicated above, she said “our life science industry and biotech industries are just booming in Greater Sacramento.”
Housing costs are also a problem, but as Barry Broome noted back in December, that’s “out of whack everywhere.
“When I look at housing, it’s really not cheap in Phoenix any longer,” he noted. “These cities and these metros where all the opportunity exists is just drawing people—and whether you’re Salt Lake, Denver, Phoenix, your housing market ends up being lopsided.”
He added, “Our community is really doing a good job of building housing right now.”
Broome noted, “From a scientific standpoint, Austin is nowhere near a scientific center the way our region is—with our food, agricultural, biomedical, and veterinarian science expertise.” Though he acknowledged, “Software, you’d probably choose Austin headquarters because of the zero-income tax and the less liability.
“So, it’s really about understanding our market position and how we differentiate it,” he said.
What I find interesting is that a lot of people who lament California losing out to Texas—probably for various political reasons—have opposed economic development in places like Davis, opposing things like the 2016 version of Nishi, as well as DISC in 2020 and DiSC 2022.
Locally we have lost some businesses.
As Tim Keller put it last month in an interview with the Vanguard, “Davis has been ‘leaking’ extremely valuable companies for decades now. Because we have a lack of commercial space, a lot of companies set up shop in Woodland, West Sac, or elsewhere. These are companies founded by Davis residents—and those residents are forced to commute out of Davis to work.”
Still, as Keller points out, Davis shouldn’t be compared to Silicon Valley. Davis is focused much more on the life sciences while Silicon Valley is focused much more on technology.
Nevertheless, at the end of the day we see that California, despite some obstacles, still presents fertile ground for the development of new technology.