The new Silicon Valley is Texas? This month, after over 40 years in California, Oracle announced it was moving its headquarters to Austin. Hewlett Packard Enterprise, which descended from the original garage start-up in the Valley, is leaving for Houston. Elon Musk has also moved to Texas, indicating that Tesla, the car company he co-founded and operates, will also switch.
Or will the next Silicon Valley become Miami? Keith Rabois, a prominent investor in the Bay Area, has been declaring that since his recent move from San Francisco. In contrast to the anti-tech sentiment roiling San Francisco, whose Board of Supervisors recently passed a resolution opposing the renaming of the city’s general hospital after the chief executive of Facebook, Mark Zuckerberg, Miami’s Mayor Francis Suarez has turned his Twitter feed into a non-stop pitch for technology entrepreneurs and investors to move to his city.
At the end of a year of great disruptions in the geography of the tech industry, the news arrives. Huge business campuses emptied, the affluent of Silicon Valley decamped into mountain and island retreats, and tech employees exchanged for more spacious, affordable real estate across the nation in their high-priced San Francisco apartments.
Several might not go back. A “flexible workweek” is considered by Google, whose perk-drenched culture set trends that other businesses adopted, offering what many tech workers had long coveted: three days in the office and two days working from home.
The grip of Silicon Valley on how start-ups find investors has also broken down in the age of Covid-19. The “20-minute rule” was long believed by venture capitalists in the region: any business they sponsored needed to be within a short drive of their offices. Now that investors have spent 10 months making early-stage deals through Zoom, that dictum seems obsolete.
Venture capitalists have recently argued that California has become inhospitable to both individuals and corporations after a summer of wildfire-filled smoke-filled skies and new San Francisco legislation that further taxes corporate income.
The Silicon Valley obituary has been prematurely written before; for decades, boom-and-bust cycles have characterized the economy of the city. Changes in military spending led to layoffs at major California firms in the early 1970s, and venture capital funding dried up. While the state’s semiconductor industry struggled in the early 1980s to compete with Japanese electronics firms, the advent of the personal computer market and the rise of consumer-facing tech superstars such as Apple and Atari were also seen in that period.
In the early 1990s, when the Cold War ended, the outlook clouded, the demand for personal computers plateaued and the United States spiraled into recession. Then, internet marketing set off a greater revolution in the Valley than ever before, turning household names into businesses such as Netscape, Yahoo, and eBay. In 2001, the Valley was turned into a dejected wasteland of vacant cubicles and pink-slip parties by the dot-com bust.
Complaints regarding the cost of living in the Bay Area have also been perennial. In the early 1980s, housing costs propelled some tech firms to move to smaller cities, including Austin (“Silicon Valley in Calif. Losing Out to Sun Belt,” wrote in 1982 in the Washington Post).). Company owners have been complaining for even longer about the high taxes in California and threatening to quit.
Silicon Valley was still roaring back, higher each time than the last. To its resilience, one secret: money. Every bust was outlasted by the wealth generated by each boom, flowing mostly to an affluent circle of venture capitalists and fortunate founders. This wealth and industry-specific expertise has not been developed by any other tech area, which is why it has had such resilience.
Today, that remains the case. Since 2015, more than $220 billion in venture capital funding has flooded into the Bay Area, and in contrast, monster public offerings have made past booms pale. The browser business that sparked the dot-com boom, Netscape, finished its first day of trading on Wall Street with a value of around $3.7 billion in today’s dollars. Airbnb, on the other hand, topped $100 billion this month on the first day of trading.
The pandemic, however, has broken familiar trends. For Bay Area staff and businesses desperate for cheaper, simpler places to live, the turn to remote work offered an escape hatch, adding to the 16 percent of U.S. information-industry employees who were already working remotely.
Technology has been spreading out already, too. Outside Silicon Valley, some of the most promising start-ups of the past decade were established. A growing number are headquartered entirely outside the country.
That takes us back to Miami and Austin. In both areas, the absence of state income taxes is one draw for the rich in technology, but this is about more than taxes.
For more than half a century, Texas has been a high-tech territory, home to NASA Mission Control, major electronics and computer companies, and research centers. The University of Texas spent decades investing in science and engineering programs in Austin, as Stanford and the University of California at Berkeley have done in Silicon Valley. Austin, long home to Dell Computer and hundreds of other enterprises, is an instant success story over 50 years in the making.
As a tech hub, Miami does not have a long history. But it is now home to the headquarters of major tech firms in Latin America, and it has attracted foreign-born entrepreneurs looking to create a worldwide customer base. This highlights another critical point: the greatest challenge to the domination of Silicon Valley does not come from within the United States. This comes from the rest of the globe.
The pandemic year has intensified developments already in motion: the globalization of technology investment; Chinese superstars such as Alibaba, Huawei, and ByteDance’s market power; tech start-ups thriving on every continent.
For those worried about where and how tech is growing, these patterns point to a significant lesson. Migrating tech moguls might complain about the government weighing them down, but Silicon Valley first flourished thanks largely to enormous government investment in higher education and science, as well as immigration policies that allowed people to come here to study, work, raise families and create American lives.
The United States is no longer spending as it used to, and a conservative immigration approach has put a chill on the recruitment of foreign talent that, after a shift of administrations, can not easily be shaken off. As a result, U.S.-based businesses must hope that the next Jack Ma will be produced by American school systems, or be willing to let promising talent work from anywhere they want to live.
After all, to make it into technology, professional and entrepreneurial individuals do not need to be in Silicon Valley. It’s not even necessary for them to come to the United States. This is the biggest problem in the country, not the relocation of a few firms to Texas.