The Fall of California
Byrne Hobart is calling it:
There are three related problems that make California economically tenuous, and a fourth that makes the situation worse:
- It’s no longer the best place in the world to start a startup.
- The gains from the existing tech industry increasingly accrue to a) passive investors, and b) lucky landlords.
- The state government is a levered bet on tech compensation.
- These three problems, which are interrelated, won’t show visible symptoms until well after they’re terminally un-fixable.
The good news, such as it is: part of my bear case on the Bear Republic is that its most valuable assets can just pick up and leave, so it’s not a bad place to be right now. If you get a nice offer from a big tech company, by all means, go to Mountain View or Los Gatos or even San Francisco. (If you can afford Pacific Heights rents and ride-sharing everywhere, you can pretend you don’t live in SF at all.)
But if you’re considering starting a company, maybe take a look at Austin, Brooklyn, Denver, or Seattle. All of these places have some of the same problems as California, but at a smaller scale.
He talks pretty extensively about real estate, some about regulation and pensions. But mostly about the laws of economic and cultural physics. A fall that is not the product of greedy corporations or blue policies, but intractable phenomena. There is a natural question of “What do you want us to do?” and the answer is “There isn’t much that you can.”
This leads to a temptation to argue that there is no problem. But remember Trumwill’s First Law of Problems Without Solutions: Just because there is a problem does not mean there is a solution, and just because there is no solution does not mean there is no problem.
Is this California? I don’t know. If you’d told me a decade or two ago how dispersed television and media production would be, with Vancouver and Louisiana rivaling Los Angeles, I wouldn’t have believed you. Most of California’s biggest industries are centered around human capital, and human capital is portable. It’s pretty easy to imagine tech going the way of aerospace engineering: Elsewhere.
If true, this would be a really mixed bag. For as much as I think the conglomeration around Silicon Valley is a problem, there is a pretty strong argument that it’s been central to the US’s success. TechAltar has a really good piece on why tech in Europe has lagged behind that of the US and one of the big reasons is how centered our industries are:
I recommend the whole thing, which touches on much more than this issue. There are a lot of reasons that European tech companies have difficulty competing with the US, but this is one of them. It speaks to how much California’s success is that it’s been able to draw people from across the country, and how California’s success is a national success. It’s hard to say how things will look if we end up on the other side of the disruption Hobart predicts..