Photo credit: Hennie Stander

 

The comings and goings of Silicon Valley have been the center of attention many times in the last 40 years. The boom of the tech industry gave rise to new opportunities in the beautiful bay area between Monterey and San Francisco, and a few minutes from San Jose.

With trillions of dollars of commercial history over the last several decades, it’s hard to debate the significance of this financial and technological hotspot. But of late, many startups are opting for other locations to begin and even large, wealthy companies are pulling up their tents and moving to greener pastures.

Why the Change?

Powerful men like Elon Musk and Peter Thiel have been criticizing the California policies and taxes for some time. They’ve since bought land and moved their headquarters to tax-friendly locations. The giant tech company Oracle has also moved.

Texas and Tennessee have become rewarding areas to set up shop. The reason, primarily, is the lack of state tax. Where some states have no state tax (which is separate from federal taxes), California has raised its state tax liability, particularly on the wealthy. They’ve also increased taxes on entrepreneurs.

This has complicated the generous tax shelters that the tech industry (and its wealthy workers/owners) has enjoyed in previous decades. California used to proudly advertise its acceptance and accessibility to startups and large companies, but the last few years have seen a steady shift towards a more difficult approach.

Beyond the Taxes

But taxes aren’t the only issue surrounding the mass exodus of Silicon Valley and California. Many have blamed the social politics behind the scenes, as well. CEOs have complained about feeling attacked and unwelcome in the exceedingly liberal social environment of California.

Elon Musk is a subtle critic of the social shifts and sees the tax policies as being an extension of bad social policies. When companies and CEOs are demonized, it’s hard to see the good that these businesses provide to local communities.

The jobs alone are a critical resource for the average cash-poor Californian. But between political/social debates and harsher tax policies, many of these companies feel more like a villain than a capital asset bringing wealth to many.

What’s To Come

Given the exodus, many of these companies still offer many remote jobs in large part to the necessity that the pandemic created. A lot of property that startups owned is now vacated to cut costs. The same goes for major corporations. Many office spaces are now available for rent/sale because they simply aren’t needed as so many have learned to successfully work remotely.

And in some respects, when some companies move away or close up shop, this creates an opportunity for the next companies, so there is still a wealth of ideas to explore even in the wake of these companies leaving. Careers in IT will continue to make up a large portion of the labor force.

As with all things, we may be seeing the beginning of the end of a once-monolithic region. That is still to be seen and it probably wouldn’t be wise to bet on that since it would likely take decades to cash in on that bet.