LETTER FROM THE PUBLISHER
Is the Business Exodus to Texas Real ?
PHOTO BY TERENCE DUFFY
For nearly 160 years , waves of generations have taken the advice often attributed to author and newspaper editor Horace Greeley to “ Go West , young man , go West and grow up with the country ,” making California an economic powerhouse among the states .
But announcements in recent months that some of the state ’ s most iconic , homegrown tech companies , including Tesla , Hewlett Packard Enterprise and Oracle , are moving their headquarters to Texas has sparked what seems like speculation that California may not be so golden and that the Lone Star is burning brighter .
The exodus-to-Texas headlines suggest there are caravans of trucks driving east , and I realize many individuals are indeed leaving California for states where the cost of living might be less . As publisher of a business magazine in the Capital Region , the relocation of these large companies concerns me deeply , as the ripple effect could impact all of us . But a look behind the headlines seems to reveal a less dire story for California ’ s workforce and economy .
In Tesla ’ s announcement , founder Elon Musk acknowledges the move was personal ( one advantage in Texas : no state income tax ) and says Tesla will continue to build cars at its Fremont assembly plant . The same is true of Oracle , which announced that many of the company ’ s 135,000 employees will have the freedom to work in any location they choose among its 284 locations around the world , including Rocklin and the Bay Area . HPE ’ s announcement says the company would continue to support its technology hub in San Jose .
Moving a company ’ s headquarters doesn ’ t necessarily mean uprooting a large workforce . That is especially true in certain industries where more commerce is done over broadband than the highways , and employees can work from almost anywhere . That ’ s even true for the C-suite . Larry Ellison , Oracle ’ s founder and chairman of its board of directors , plans to work from Lanai , his semiprivate Hawaiian island , defying the idea that a headquarters is defined by having executives in corner offices .
Even so , no matter how symbolic , a company moving its headquarters sends a message . Technology companies that were birthed in the Bay Area have grown into global companies in a global economy . California now has to compete with places such as Denver and Austin , which have developed their own tech centers . And since the tech industry has evolved from hardware development to software products , competition now can come from every part of the world .
Just how competitive is California compared to other states ? In its 2019 “ Best States For Business ” rankings , Forbes has California 31st in its comparison in six categories . Texas and Florida , which offer lower housing prices and have no state income tax , were ranked second and fifth , respectively .
Notably , California ranked 47th among the states for the cost of doing business , with housing affordability one reason for that . We also scored a lowly 40th for the regulatory environment , perhaps reflecting the recent fight over the fate of gig workers and the zealousness of local governments and the state Legislature to over-regulate how business is done . Underscoring that point , the California Chamber of Commerce identified 50 pieces of proposed legislation that it labelled “ job killer ” bills in 2019 and 2020 . Fortunately , only two were signed into law .
On the flip side , Forbes ranked California higher for the factors that have always sparked our economy : 10th for growth potential and first for economic climate . A big reason for that is access to venture capital , necessary to feed new businesses . A PwC report about 2019 shows that California led all states in venture funding that year with $ 58 billion that fueled 2,311 new businesses .
In his conversation with Wall Street Journal Editor-in-Chief Matt Murray during the newspaper ’ s CEO Council Summit in December 2020 , Musk says , “ There ’ s a lot of things that are really great about California . … ( But ) if a team has been winning for too long , they do tend to get a little complacent , a little entitled , and they don ’ t win the championship anymore . California has been winning for a long time … and they ’ re taking ( companies ) for granted a little bit .”
With a new legislative session underway , elected officials need to pay attention . We need to do everything we can to ensure that both new and established businesses succeed and that we achieve that growth potential Forbes sees . As the Forbes ranking shows , “ job killer ” bills , even when not passed into law , send a strong symbolic message of their own .
Fewer of those would go a long way toward helping California continue to compete in a global economy where rivals come from every geographical direction .
What do you think ? Let me know at winnie @ comstocksmag . com .
Winnie Comstock-Carlson President and Publisher
February 2021 | comstocksmag . com 13