How State Policy Makers Can Avoid It Becoming Siligone Valley

As unlikely as it seems, we could see in our lifetimes the decline of Silicon Valley, maybe the most dynamic economic and innovation machine man has ever known. Can it be avoided?

Facebook cofounder Mark Zuckerberg, who’s earned Silicon Valley’s grandest fortune, said at last month’s 2020 Silicon Slopes Tech Summit in Utah that “I do think on balance if I was starting from scratch now, I would not pick the Bay Area.” 

While he’s “not super negative on” the Bay Area, quite a few are. San Francisco’s most recent annual residential survey found that 35% say they’re likely to leave the city, with 15% saying they’re “very likely’ move out and 20% saying it’s “somewhat likely” they’ll go.

The Facebook chairman and CEO is not the first tech executive to send a chilly wind through the valley. Nor the most blunt. Reddit founder and venture capitalist Alexis Ohanian said straight out last year that despite San Francisco being a great city, “no one in their right mind” would build a company there.

Is it because the region has become an echo chamber?

“There’s a lot of advantages to building a company that is not in such a monoculture,” Zuckerberg said, adding that “Silicon Valley being an all-tech town there’s not as much diversity of how people think about things as you’d like, in a lot of ways.”

The valley has a reputation for being monolithically left. Zuckerberg himself admits it’s “a very left-leaning place.” And the great majority of executives, managers, and workers appear comfortable with that. 

But being insulated from outside ideas can hold back rather than promote growth. According to Undercover Recruiter, “employees with different political affiliations may have different approaches to problem-solving, allowing them to offer some invaluable insights … diverse perspectives can help your business thrive.” 

Just as California would have the fifth-largest economy on the planet if it were an independent nation, Silicon Valley would have a larger economy, valued at $275 billion, than Finland, the Czech Republic, Portugal and other European nations, if it were a separate country. The nine Bay Area counties would be the world’s 19th largest economy if they were combined into a nation, with a $535 billion GDP. As a state, they’d be the richest. 

The valley is a remarkable story. But can it, and will it, last? 

A healthy economy is a churning economy. Only 52 of the U.S. companies that were on the Fortune 500 list in 1955 are still there today (and we’re better off because of the “perennial gale of creative destruction”). At some point, the tech world that fuels Silicon Valley will be overtaken by an economy driven by forces not yet imagined.

But before that happens, the valley could begin fading due to self-inflicted wounds — the Blue State public policies that have produced trouble all across California.

Extreme housing costs in the region make it hard for tech companies to recruit capable employees. So do the high personal income taxes they’d be liable for. Steep business taxes make California less desirable for startups and push established companies out, as does the general hostility toward business, from Sacramento down to the city halls. It’s also tough to sell the state when the quality of life is devalued by local elected officials. San Francisco and Oakland, for instance, are 148th and 144th in WalletHub’s ranking of the nation’s 150 worst-run cities

California businesses have to operate in a treacherous legal environment, as well. The state is “a perennial Judicial Hellhole,” says the American Tort Reform Association, overloaded with “business-crushing lawsuits.”

 There are options. Houston and Austin in Texas, Las Vegas, Denver, and Miami are “great alternatives” to Silicon Valley, according to Inc. magazine. All are successfully attracting capital and entrepreneurs, tend to be more open to outsiders than Silicon Valley, and are not as expensive to live in. 

Entrepreneur magazine suggests Roanoke, Virginia; Provo, Utah; Huntsville, Alabama; San Antonio; Nashville; and San Diego as “unsung startup tech” alternatives. The cost of living is lower in each, even in San Diego, than it is in the Bay Area, and the tech talent, groomed by local universities, is ready to work.

California policymakers should never imagine that Silicon Valley is too big to fail. In fact, if they continue to see it as simply a cash spigot to fund their “progressive” agenda, they’ll be complicit in its downfall.

Kerry Jackson is a senior fellow with the Center for California Reform at the Pacific Research Institute.

This article was originally published by Fox and Hounds Daily.

Comments

  1. Tech has thrived here because tech moves faster than politician’s ability to regulate it.

    That said, there are limits to how much economic growth can occur in a fixed space where everyone’s a NIMBY. For every tech worker you also need other types of workers. Tech has pushed out even well paid professionals leaving food workers and average office workers in an impossible position.

    When run down 2bd starter homes in a crappy school district cost $1 million what motivation does 98% of the population have at a decent life?

    Bottom line, Silicon Valley is already reaching its limits without new freeways or rail lines to the Central Valley.

  2. Instead of installing pay toll lanes, CalTrans should be double-decking the 101 freeway.

    Instead of trying to alleviate the miserable commute in the Bay Area, they rather profit from it.

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