Tesla’s Texas Move Is Latest Sign of California Losing Tech Grip(bloomberg.com)
bloomberg.com
Tesla’s Texas Move Is Latest Sign of California Losing Tech Grip
https://www.bloomberg.com/news/articles/2021-10-08/tesla-s-texas-move-is-latest-sign-of-california-losing-tech-grip
93 comments
I, on the other hand, think that this is part of a trend.
Hotspots like California rarely stay on the very top for more than 3-4 decades. After that, a certain rot starts to set in and new players find it easier to pitch up their tent elsewhere, where NIMBYism isn't as strong, landlords are less extortionate and governments more friendly.
Hotspots like California rarely stay on the very top for more than 3-4 decades. After that, a certain rot starts to set in and new players find it easier to pitch up their tent elsewhere, where NIMBYism isn't as strong, landlords are less extortionate and governments more friendly.
The problem with that logic is the streetlight fallacy. If you're predicting "rot" in the Bay Area, it's true, you can cite your "30-40" year timeframe and argue it's "due" or whatever.
But people have been predicting this kind of Downfall of California for essentially all of those four (more like five now) decades! And they were wrong every time.
So, are you correct now because you are predicting Californian Doom from proper first principles? Or are you, like all your forebears, constructing those principles to argue for the conclusion you want to see? I think simple numbers (from your own post!) give you at best a 2-3% chance of being right.
California is fine. You'll know it's lost when somewhere else is better.
But people have been predicting this kind of Downfall of California for essentially all of those four (more like five now) decades! And they were wrong every time.
So, are you correct now because you are predicting Californian Doom from proper first principles? Or are you, like all your forebears, constructing those principles to argue for the conclusion you want to see? I think simple numbers (from your own post!) give you at best a 2-3% chance of being right.
California is fine. You'll know it's lost when somewhere else is better.
"somewhere else is better."
California's neuralgic point is Silicon Valley. IMHO if SV corporations start moving out in larger numbers, that will be the definite indication that somewhere else is better.
It is my impression that cost of living in and around SV is absolutely crazy, even for FAANG employees.
California's neuralgic point is Silicon Valley. IMHO if SV corporations start moving out in larger numbers, that will be the definite indication that somewhere else is better.
It is my impression that cost of living in and around SV is absolutely crazy, even for FAANG employees.
> IMHO if SV corporations start moving out in larger numbers, that will be the definite indication that somewhere else is better.
And they're not. Ergo...
And they're not. Ergo...
Yet...
> where NIMBYism isn't as strong, landlords are less extortionate and governments more friendly.
It's not like Texas is that much better in any of these aspects. NIMBYism is a huge problem in the Austin area, which is seeing massive increases in rents and inability to keep up with housing demand due to entrenched real estate ownership.
The rent problem extends to the commercial side as well, which has seen so many local businesses fold due to rent pressure.
And yes, the government is much more business-friendly in Texas than it is California from a financial perspective, but major failures to govern during situations like the "Winterpocalypse" this year raise serious questions about Texas' long-term business viability. Case in point: according to Texas' own energy grid operator, the state was less than 5 minutes away from total failure during the winter storm, which would have results in statewide power outages lasting on the order of months. Not days, not weeks... months. Imagine for a minute what that would have done to one of the largest economies in the country[0] had it actually happened.
0: https://www.texastribune.org/2021/02/18/texas-power-outages-...
It's not like Texas is that much better in any of these aspects. NIMBYism is a huge problem in the Austin area, which is seeing massive increases in rents and inability to keep up with housing demand due to entrenched real estate ownership.
The rent problem extends to the commercial side as well, which has seen so many local businesses fold due to rent pressure.
And yes, the government is much more business-friendly in Texas than it is California from a financial perspective, but major failures to govern during situations like the "Winterpocalypse" this year raise serious questions about Texas' long-term business viability. Case in point: according to Texas' own energy grid operator, the state was less than 5 minutes away from total failure during the winter storm, which would have results in statewide power outages lasting on the order of months. Not days, not weeks... months. Imagine for a minute what that would have done to one of the largest economies in the country[0] had it actually happened.
0: https://www.texastribune.org/2021/02/18/texas-power-outages-...
I expect Tesla will generate all or most of its own electricity but your point is very well taken for industry in general. Texas generates more wind energy than any other state (and thus earns more money for that wind) but the governor hates wind and blamed it for the grid failures, which were clearly caused by other mechanisms. Texas government is extremely f'ed up right now.
> I expect Tesla will generate all or most of its own electricity
That's a moot point in a disaster scenario where the grid is down and traffic systems and utilities are disabled, etc. Tesla can't generate its own water, and that was one utility that was knocked out for much of Texas during the storm. There's a lot more that goes into keeping a manufacturing operation like that functional than just energy self-sufficiency.
That's a moot point in a disaster scenario where the grid is down and traffic systems and utilities are disabled, etc. Tesla can't generate its own water, and that was one utility that was knocked out for much of Texas during the storm. There's a lot more that goes into keeping a manufacturing operation like that functional than just energy self-sufficiency.
> Tesla can't generate its own water
Of course they could -- in theory they could drill a well and put in their own septic system. That's probably illegal in Austin proper but the Tesla facility is sufficiently far away that it might be legal there.
Of course they could -- in theory they could drill a well and put in their own septic system. That's probably illegal in Austin proper but the Tesla facility is sufficiently far away that it might be legal there.
I agree that there is a trend away from California, doubt it is related to NIMBY-ism, governments. When Hewlett & Packard or Steve & Steve kicked off their businesses in the Bay Area it wasn't because government was friendly or NIMBY-ism was lacking.
Now it's simply too damn expensive to live in the Bay Area, too expensive therefore to hire.
That's the cost of success and why the 3 to 4 (5 to 7?) decade trend.
Austin will become too expensive and everyone will head to North Carolina (or wherever) in a few decades....
Now it's simply too damn expensive to live in the Bay Area, too expensive therefore to hire.
That's the cost of success and why the 3 to 4 (5 to 7?) decade trend.
Austin will become too expensive and everyone will head to North Carolina (or wherever) in a few decades....
Well, NIMBYism is a function of population density and governments which want to attract tax dollars are less confrontational than those that are used to having a massive tax base.
Where I live, the regions that have less investment and fewer people fight over investments (including railways and roads), while the richer ones like Prague often find reasons why to slow down or even stop such developments.
But yeah, this awaits Texas too and 2050 will have a new champion. Perhaps North Carolina, who knows.
Where I live, the regions that have less investment and fewer people fight over investments (including railways and roads), while the richer ones like Prague often find reasons why to slow down or even stop such developments.
But yeah, this awaits Texas too and 2050 will have a new champion. Perhaps North Carolina, who knows.
NIMBYism is more a factor of incentives. Because of prop 13 California gets a large portion of state revenue from income tax, Texas has no income tax and relies on their very high property tax. Texas government has a strong incentive to promote development because that increases their tax base. Compared to California, construction permitting is a rubber stamping process in Texas. Houston, the 5th largest city in the USA, doesn't even have zoning laws.
And it just makes sense to have your HQ at your largest factory, in NA at least.
But as has been talked about, a lot of employees now want to work from home... meaning they don't have to hire just around SV, especially when those employees are also moving away from SV.
I mean, its not like they will just drop all their current engineers. That would not be smart or wise. So they will keep them, but slowly transition to remove or TX employees as either new positions are created or old people leave and new openings arise.
I mean, its not like they will just drop all their current engineers. That would not be smart or wise. So they will keep them, but slowly transition to remove or TX employees as either new positions are created or old people leave and new openings arise.
Tesla is continuing to expand Fremont. Austin happens to have a huge Gigafactory opening up which will require extra attention during ramping and it's closer to SpaceX's operations in South Texas. It seems like a much more convenient location for Elon to have his HQ. You don't have to interpret every corporate move as a slight againt California.
This isn’t entirely a bad thing. Trying to cram everything into coastal areas is not sustainable.
Agreed. The country will be better off if things spread out a little over tthe country. You could argue that the high density of companies in SV is actually causing a lot of problems for a lot of people who need a place to live.
It’s funny to me whenever someone makes this argument that the cause of the housing crisis is too many successful companies. Most cities are bending over backwards to get some of these jobs, will it cause the same problems in those cities, if not why not?
The whole thing feels like a narrative attempt at scapegoating versus the more direct hypothesis: you can not constrain supply to near flat in a growing region and expect things to work out, but of course this is very hard to address since current policies benefit existing property owners.
The whole thing feels like a narrative attempt at scapegoating versus the more direct hypothesis: you can not constrain supply to near flat in a growing region and expect things to work out, but of course this is very hard to address since current policies benefit existing property owners.
It’s not just housing, but essential supplies like food and water are stressed. Transportation infrastructure is overloaded. Degradation of environmental resources, made worse by global warming. The percentage of the population living in coastal counties keeps increasing. It is not sustainable.
Everybody needs water to survive, but you can still drown in too much of it.
Most places grow by sprawl with few if any complaints.
Density would be contentious anywhere; the coastal housing crisis cities are unique in that it's their only option.
Density would be contentious anywhere; the coastal housing crisis cities are unique in that it's their only option.
I mostly worry about cultural divergence and growing discontent.
"Tech" is a rather meaningless term. In any case, Tesla is much more like GM or Ford than like Google or Microsoft: They are a car company with a business that's very hard to scale. Zero chance that they become a monopoly in their space. Autonomous cars are a pipe dream and Tesla's stock price is extremely inflated because Musk has successfully convinced investors that Tesla is a tech company in the sense of GAFAM. Therefore, Teslas "move" doesn't mean a lot to California's "tech grip"
The only reason to start a tech company in CA was the proximity to talent and capital. I always found it funny that supposedly cutting edge high tech VC’s wanted you nearby when we had all the tools to base anywhere in the world. Seemed like they were unnecessarily limiting deal potential. Same thing with engineers.
Now that remote work has accelerated into the mainstream, there is zero reason to base in CA, and many reasons to go elsewhere.
Edit: also, the CA of today is very different from the one that cradled the computing industry.
Now that remote work has accelerated into the mainstream, there is zero reason to base in CA, and many reasons to go elsewhere.
Edit: also, the CA of today is very different from the one that cradled the computing industry.
Middle class effective tax rate is higher in Texas (but lower as you get richer). But I suspect it’s more labor laws. A lot of Tesla’s conflict with the state has been around worker safety.
Effective tax rate based upon what? There’s no state income tax.
Texas makes up for "no income tax" with high property and sales taxes.
Texas has high property tax rates, but some of the lowest sales tax rates in the country (6.25%), and no income tax.
It it is the higher property tax rates that cause property prices to be lower, so that the actual property tax paid is not too high compared to a low property tax rate/high property value state like California.
Effectively a lot of the money that, in California, goes to landlords or housing investors, in Texas goes to the state via taxes on land.
This is due to the superior efficiency of land taxes versus income taxes. Land taxes are "free" money that do not hurt economic activity. But property taxes cover both land and structure, so it's not the perfect tax system - however it's pretty close.
It it is the higher property tax rates that cause property prices to be lower, so that the actual property tax paid is not too high compared to a low property tax rate/high property value state like California.
Effectively a lot of the money that, in California, goes to landlords or housing investors, in Texas goes to the state via taxes on land.
This is due to the superior efficiency of land taxes versus income taxes. Land taxes are "free" money that do not hurt economic activity. But property taxes cover both land and structure, so it's not the perfect tax system - however it's pretty close.
Thanks for clarifying. It's been a while since I lived in Texas. I also recall being taxed yearly on my cars to pay for the schools, which was not onerous but struck me as unusual. Is that still a thing?
For vehicles, it's the standard sales tax when you purchase it, net of any sales taxes you paid to other states.
Registration is about $50 plus local surcharges, maybe another $10-$20. There is list here:
https://www.txdmv.gov/sites/default/files/body-files/FeeChar...
In terms of it funding schools, it's fungible money going into state or local coffers, so that's more of a political thing to justify the fee. Schools get some funding from the state and the rest from local government. The fungibility of money must be one of the best kept secrets in politics.
Registration is about $50 plus local surcharges, maybe another $10-$20. There is list here:
https://www.txdmv.gov/sites/default/files/body-files/FeeChar...
In terms of it funding schools, it's fungible money going into state or local coffers, so that's more of a political thing to justify the fee. Schools get some funding from the state and the rest from local government. The fungibility of money must be one of the best kept secrets in politics.
It doesn’t make up for it. I live in Texas and considered moving to CA. The math was not quite simple but at the time (about 3 years ago) to roughly keep standards of living , my paycheck would have to be about $50k higher.
The property taxes (now climbing to about $10k/year for a decent size family home in metro area) and still kinda lower sales tax (effectively climbs to 8.25% (state set maximum, includes state + county/city)) just don’t add to to California’s income tax + property taxes.
Granted there’s much more to all of it. Texas salaries is much lower then CA.. and then you also have the polar opposite of left vs right :(
The property taxes (now climbing to about $10k/year for a decent size family home in metro area) and still kinda lower sales tax (effectively climbs to 8.25% (state set maximum, includes state + county/city)) just don’t add to to California’s income tax + property taxes.
Granted there’s much more to all of it. Texas salaries is much lower then CA.. and then you also have the polar opposite of left vs right :(
This reminds me of when Boeing moved their headquarters to Chicago. HQ lost touch with the operations, and I see the 737Max as a direct consequence. Tesla's safety record is already pretty shoddy... I don't see this going well.
Why do we view communities as competing with each other? How does people working in Texas, or China for that matter, hurt people in California? Don't we want people everywhere thriving?
Perhaps because it informs our future investments. If we see some communities are thriving and others are not, it may be more prudent to live or invest where there is more potential of future prosperity.
[deleted]
I think Elon is playing the long game and there are some other side benefits. Is he frustrated with California? For sure. He’s also close to SpaceX operations in Texas where he’ll be spending a lot of time, but the long con I think he is playing is this:
Conservatives don’t like California. Electric cars are a “liberal” thing. Except when a guy like Elon says government bad, California bad, taxes bad, I’m moving to Texas to hang out with the cool kids and then all of a sudden he’s made it acceptable culturally for conservatives to own electric cars because hey he’s a Texas guy now. Pair that with his maverick reputation and now he’s yet again accelerating EV adoption by reducing cultural barriers. It’ll be telling if Texas reverses their anti-market laws preventing Tesla from being able to sell cars in Texas. That’s the first sign.
Elon doesn’t need to win over liberals - they’re on the EV train already. But he does have to make friends with and win over conservatives.
Does he have this master plan? Doubt it. But it’ll work out this way anyway IMO.
Conservatives don’t like California. Electric cars are a “liberal” thing. Except when a guy like Elon says government bad, California bad, taxes bad, I’m moving to Texas to hang out with the cool kids and then all of a sudden he’s made it acceptable culturally for conservatives to own electric cars because hey he’s a Texas guy now. Pair that with his maverick reputation and now he’s yet again accelerating EV adoption by reducing cultural barriers. It’ll be telling if Texas reverses their anti-market laws preventing Tesla from being able to sell cars in Texas. That’s the first sign.
Elon doesn’t need to win over liberals - they’re on the EV train already. But he does have to make friends with and win over conservatives.
Does he have this master plan? Doubt it. But it’ll work out this way anyway IMO.
I have a suspicion that many conservative people will take to electric vehicles easier than many think. The f150 lightning I'm sure will be mocked mercilessly, but when people actually get a sense for that acceleration, the convenience, and overall experience, they'll switch.
Yea… we are on a road trip right now. Tons of people at every super charger stop ask questions. Guaranteed at least one. Some drive trucks!
But it’s going to be an economics choice. Electric for now (ever?) is just way cheaper.
But it’s going to be an economics choice. Electric for now (ever?) is just way cheaper.
Do you somehow have an electric F150? Or just an electric car? (Asking because I’d love to hear about someone’s first-hand experience with the F150)
If presales are any indication, the electric F-150 is already a huge success.
We already have. There’s Teslas everywhere in Texas.
>> Electric cars are a “liberal” thing
No, the government deciding what kind of car you are allowed to drive is a liberal thing.
If there are externalities, then tax them, get the prices right, and let people decide for themselves based on those prices. As my grandmother said about speeding tickets, drive as you can afford.
But letting people decide for themselves is not a liberal thing. Hopefully still kind of a Texas thing though.
No, the government deciding what kind of car you are allowed to drive is a liberal thing.
If there are externalities, then tax them, get the prices right, and let people decide for themselves based on those prices. As my grandmother said about speeding tickets, drive as you can afford.
But letting people decide for themselves is not a liberal thing. Hopefully still kind of a Texas thing though.
> If there are externalities, then tax them, get the prices right, and let people decide for themselves based on those prices.
Are Republicans coming around to carbon taxes? If so that’s good and new to me.
> But letting people decide for themselves is not a liberal thing. Hopefully still kind of a Texas thing though.
Are you naive to how electric vehicles and caring about the environment have been turned into a liberal identity thing?
Are Republicans coming around to carbon taxes? If so that’s good and new to me.
> But letting people decide for themselves is not a liberal thing. Hopefully still kind of a Texas thing though.
Are you naive to how electric vehicles and caring about the environment have been turned into a liberal identity thing?
This isn't a question of liberal or conservative principles, if you talk about, for example, abortion, then it's the conservatives who think the government should decide what you're allowed to do with your body.
And a conservative would say "no because there's a victim involved" and they'd be right, that's what this is about: is the impacts of non-ev cars on the people around us something that we should care about, take seriously, and regulate - if conservatives think it is then they will want more rigid laws as they do for other serious infractions.
And a conservative would say "no because there's a victim involved" and they'd be right, that's what this is about: is the impacts of non-ev cars on the people around us something that we should care about, take seriously, and regulate - if conservatives think it is then they will want more rigid laws as they do for other serious infractions.
Exactly, this political drama is advertising. Truck will hit next year and true Texans will buy it, prolly will throw in that dont mess belt buckle..
Electric cars are not a liberal thing. We Texas conservatives love fast expensive cars.
So I agree - it’s just energy and shouldn’t really be a liberal vs conservative thing but, we’ll, I doubt liberals are parking trucks in Supercharger spots or trying to drive into our lane when we are passing them like this morning… could be wrong I guess.
yesterdays thread about the move announcement itself: https://news.ycombinator.com/item?id=28793615
No one single metropolitan area should have a grip on the industry that is gradually consuming the entire economy.
Tesla’s move has nothing to do with California. Musk got his ego hurt because he wasn’t given special treatment during covid when he asked for special exemption to run his plants. He may have chosen Texas for the taxes but he would have moved even if Texas didn’t exist, may be.
People raving about moving to Texas is plain stupid. Housing prices in places like Austin have increased to unaffordable levels for many locals. They are affordable only for California transplants.
I think it exactly is people moving from California to Texas.
Also, my sense is that the whole country is experiencing unaffordable housing for many (he says while watching real estate prices in Omaha skyrocket in the past year).
Also, my sense is that the whole country is experiencing unaffordable housing for many (he says while watching real estate prices in Omaha skyrocket in the past year).
Blame higher cost of living, taxes, lack of law enforcement, and higher level of homelessness.
A story in three parts:
@LorenaSGonzalez: F*ck Elon Musk
@elonmusk: @LorenaSGonzalez Message received
SF Chronicle: BREAKING: Tesla will move its headquarters from Palo Alto to Austin, Texas, CEO Elon Musk said at the company's annual shareholder meeting Thursday.
https://twitter.com/micsolana/status/1446248026540896262?s=2...
@LorenaSGonzalez: F*ck Elon Musk
@elonmusk: @LorenaSGonzalez Message received
SF Chronicle: BREAKING: Tesla will move its headquarters from Palo Alto to Austin, Texas, CEO Elon Musk said at the company's annual shareholder meeting Thursday.
https://twitter.com/micsolana/status/1446248026540896262?s=2...
glutamate(5)
This is the second time these PayPal mafia-types have tried to make a California exodus happen. First time was right after their liquidity event, when they moved to all of the usual states where you go (Washington, Nevada, whatever). It didn’t work.
There is this amazing thing that happens in California, where culture and technology go to war with each other and engage in a death match that creates better technology and (sometimes, like in the 90s) better culture. This doesn’t really happen anywhere else. And if this is the end of that cycle, it’s sad for a whole lot more than the people who live in California. So, I hope it fails once again.
I wish these stories were written as they should be: “economic migrants who became rich off California decide to leave the state, try to turn it into a social movement.” For some reason that only happens when right-wing politicians want to paint non-members of a certain ethnicity as a bunch of parasites...
There is this amazing thing that happens in California, where culture and technology go to war with each other and engage in a death match that creates better technology and (sometimes, like in the 90s) better culture. This doesn’t really happen anywhere else. And if this is the end of that cycle, it’s sad for a whole lot more than the people who live in California. So, I hope it fails once again.
I wish these stories were written as they should be: “economic migrants who became rich off California decide to leave the state, try to turn it into a social movement.” For some reason that only happens when right-wing politicians want to paint non-members of a certain ethnicity as a bunch of parasites...
Tesla is not leaving California, they're continuing to expand operations in Fremont. It's just that Tesla is now a worldwide company and Texas happens to be a more convenient location for the time being.
They’re moving because this allows the top earners to not pay state income tax. We don’t need to dress it up at any more noble than that.
That is likely true.
I was surprised though at how high property taxes are in Texas (relative to California where I have lived for some time). Also, toll roads.
It's almost like you got to pay for things somehow. ;-)
The cost of housing is so far down the ladder with regard to the Bay Area though that even with the higher property tax rates, it's still probably a money-saving move to head to Texas.
(The toll road thing is a crazy regressive tax though, IMHO.)
I was surprised though at how high property taxes are in Texas (relative to California where I have lived for some time). Also, toll roads.
It's almost like you got to pay for things somehow. ;-)
The cost of housing is so far down the ladder with regard to the Bay Area though that even with the higher property tax rates, it's still probably a money-saving move to head to Texas.
(The toll road thing is a crazy regressive tax though, IMHO.)
The old joke in California politics was that you had two parties: both wanted good roads, schools, etc. but only one was willing to pay taxes for them. I found that quite vivid growing up in the 80s and 90s where you could basically watch infrastructure falling apart because maintenance required things like bond issues.
Are you speaking of high in absolute dollars or percentage of home value? I'm comparing RE tax amounts between Fremont, CA and Austin and it seems like for similar house sizes, the absolute amount of RE taxes paid is way lower in Austin, but it's possible I'm misinterpreting things.
And the big thing they're doing in Texas, the giant factory beginning to ramp in Austin, has been known for years. It's not like they were going to build a second Bay Area gigafactory...