By Elena Alonso Cardeñosa
Your commercial awareness dose
Silicon Valley has been the epicentre of the tech industry for decades, but more people are now leaving California than arriving; this pandemic has just made more evident this “exodus” of Silicon Valley. In recent weeks, recognized corporate leaders with deep roots in Silicon Valley have announced that their companies will be moving their headquarters to Texas, where taxes and regulations are much favourable.
Hewlett-Packard Enterprise, founded by Bill Hewlett and David Packard in Palo Alto in 1939, is moving its headquarters to Houston, Texas, and the software giant Oracle has already relocated its headquarters from Redwood City (California) to Austin, Texas. A movement that Elon Musk had been anticipating for some time.
In Boca Chica, to the south, the company SpaceX develops the new space vehicle Starship to colonize Mars. In McGregor, in the area of Waco, it tests the rocket propellers. His foundation is also in Texas, the businessman justifies his decision by saying that California is no longer attractive to his projects.
He also spoke of complacency on the part of legislators with their status as a great economic power. If the state were an independent country, it would be among the top ten in the world. San Francisco Bay would be more productive on its own than Finland, and as Musk himself says, its global influence as a technological pole is incomparable to any other. The entrepreneur’s suspicion of California became evident last spring, due to restrictions imposed by the authorities of Alameda County during the first covid-19 wave. Elon Musk in this occasion even threatened to take the Tesla headquarters from Fremont to Nevada or Texas.
Oracle and Hewlett-Packard Enterprise are already in that process of offshoring, which is drawing parallels with the rapid decline that the city of Detroit experienced when the automotive industry began to shift its production to regions with more favourable business conditions. This time the pandemic is becoming an excuse to leave Silicon Valley and offer its employees more flexibility when it comes to working. Companies like Apple, Google, Facebook, or Twitter forced their employees to work from home and many chose to move to states like Nevada, Colorado, Arizona, New Mexico, or Texas looking for a better quality of life.
The company Oracle also chooses Austin, which during the last decade emerged as an increasingly attractive alternative technology pole. HPE relocates to Houston, the fourth most populous city in the U.S. In Texas, Dell was founded. Oracle’s roots in Silicon Valley go back to 1977 when the valley began to transform into a “promised land” for any start-up in the tech world.
Elon Musk’s criticism of California has another component to it; Texas does not apply a state income tax while California imposes the highest income tax in all the US on its wealthiest residents. This is especially relevant for Elon Musk, currently the richest man in the world. Texas own Governor Greg Abbott said ‘’While some states are driving away businesses with high taxes and heavy-handed regulations, we continue to see a tidal wave of companies like Oracle moving to Texas thanks to our friendly business climate, low taxes, and the best workforce in the nation’’.
In September this year, millionaire Jeffrey Gundlach pointed to the Californian government as “incompetent” for allowing the “job creators” to leave. California’s state income tax rate of 13.3% is the highest in the country, whereas Texas is one of seven states with no income tax.
The mobilization of the workforce for remote employment, in parallel, causes cities like Austin to have a high-level workforce. Austin is the most progressive city in the state of the Lone Star and has world-class college campuses. Oracle has had for years a technology centre in the city, and Apple is in the process of investing $1 billion in a similar complex that will host up to 15,000 employees, such as Facebook and Google. Amazon, IBM, Samsung, AMD, and Dell are among the companies that integrate the ecosystem. The city is becoming incredibly appealing for tech companies, and it is on its way to becoming the next tech capital of the United States.
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