Not one to shy away from being an outlier, Tesla and SpaceX CEO Elon Musk has found himself a new home in the Lone Star State. The inventor revealed earlier this month that he’d moved to Austin from California, where he’s lived since interning in Silicon Valley as an undergraduate at Penn in the mid-nineties.
Should I Stay or Should I Go Now?
Musk’s move is notable for several reasons. As the world’s second-richest person and as the owner of some of the United States’ most famous and innovative companies, his change of scenery would be newsworthy even without Tuesday’s public explanation. But while Musk slipped out quietly, he held back no punches on his reasoning once in Texas. In an interview with the Wall Street Journal, Musk criticized California for its complacency as an economic and technological power.
Musk used an analogy to sports, saying, “If a team has been winning for too long, they do tend to get a little complacent, a little entitled, and then they don’t win the championship anymore. California’s been winning for a long time. And I think they’re taking [their innovators] for granted a little bit.” It’s not the first time he’s publicly condemned the Golden State this year, either. In May, Musk threatened to move Tesla’s headquarters out of the state following California’s shelter-in-place order, going as far as filing suit against Alameda County when the company was not allowed to reopen its doors.
Musk’s Companies Stay in CA, But Others Go
It should be noted, though, that while Elon himself has made the switch, both Tesla (Palo Alto, CA) and SpaceX (Hawthorne, CA) are maintaining their extensive operations in the state. Musk also has practical reasons for residing in Texas, particularly as SpaceX’s Starship design and construction is located in nearby Boca Chica. Privately, he also has financial incentives; Texas has no income tax while California’s 13.1% rate is the highest in the nation.
Musk’s high profile makes the news, but he’s only the latest player in Silicon Valley’s recent exodus. High taxes and high prices have put stress on young tech companies, and the attractiveness of smaller tech hubs has increased correspondingly. Tech workers can expect to pay thousands of dollars per month in rent, rendering it extremely difficult to raise a family in areas like Palo Alto. The rising influence and negative publicity of some of the largest tech companies also detract from the appeal and cities with youthful talent like Austin, Boulder, Chapel Hill, and Lincoln benefit as a result. With organizations like Hewlett Packard, Oracle, and others making moves to Texas, it could be the beginning of a new trend. And other leaders, like Dropbox CEO switched his personal life to Texas as well, with other executives headed to Florida.
Pandemic Life Signals Changing Personal Priorities
The pandemic also forces tech workers to consider the benefit of expensive yet attractive locations when workers must work from home. Inherently, the tech industry is relatively well-adapted for this shift to remote working, further exacerbating the lack of demand. Silicon Valley was once known for its stringently free-spirited and creativity-focused work environments—and still is—but the office changes that companies like Google pioneered can be replicated in virtually any small city. In any event, much of the appeal for young workers is lost entirely when in-person operations are halted.
In many respects, Elon Musk perfectly encapsulates the creativity and innovation that California is known for. Zip2 and PayPay, his first two companies, perfectly align with the democratization of access ethos preached throughout Silicon Valley. SpaceX’s location in Hawthorne is a nesting ground for the talent around NASA’s Jet Propulsion Laboratory. Los Angeles’ Tesla and the Boring Company provide clean energy and traffic congestion solutions to a city arguably in need of them both.
Warning: Stay Competitive
Like so many other innovators, Elon Musk—the electric car guru, the space pioneer, the wacky inventor—refined his craft in a place best positioned to allow him to do so. It’s becoming increasingly evident that California is no longer the consensus go-to destination for technological innovation. Silicon Valley remains today as the world leader, but its comparative status is dwindling rather quickly. Does this mean that Austin is the de facto replacement? Probably not. California and Silicon Valley’s problems may be partially self-imposed, but can likely be attributed to the decentralization [geographically, not in terms of market share (See: Facebook)] of innovation in America.
No longer are funky workplaces or easy access to destinations enough to attract all of the top talent; the Valley and the State need to keep its unrivaled status. Musk’s move should serve as a warning—not only to California but to all of the United States—to stay competitive in the job market and avoid complacency.
