In 2009 I graduated from college, got my first job in tech, and moved from Pittsburgh to Palo Alto. It was incredible to encounter tech moguls on the street who well were on their way to becoming the richest and most powerful people in the world — founders of companies like Google, Apple, and Facebook. I regularly met people who went on to start huge companies. After a few years, I started a company of my own, opening up an office in San Francisco per the trend of 2012. Being in Silicon Valley was a critical part of getting the company off the ground. Most people we needed were local and easy to meet up with — investors, talent, partners, advisors, etc.
Sadly, during my time here, I saw San Francisco deteriorate because of poor, impractical decision-making by the city and California governments. Concerned with the direction the city was headed, my wife and I started exploring cities like Austin and Miami as potential alternatives. Over the years I've been impressed by Texas's growth under a government and culture that values freedom, and I've had a great time visiting the state:
When COVID hit, the advantages of being in San Francisco disappeared overnight, like "an arm wrestling match where one arm just completely went slack". All of my meetings moved from Salesforce Park to Zoom. Suddenly my wife and I were totally free to live anywhere in America. We spent a few months in Marin (to get out of SF quickly) and then bought a ranch just outside of Austin, Texas. Here's why we decided to move.
Zero state income tax is obviously a great advantage of living in Texas. Given how wasteful modern governments are, legally minimizing your tax bill makes you smart. But having a governor who is this fired up about not having an income tax — and a culture of people who voted for a constitutional amendment on it — is amazing:
In May, I predicted that California would, amid the pandemic and subsequent exodus of tech workers, increase taxes to make up for lost revenue. They did not do this by repealing Prop 13, which has distorted the housing market and given special privileges to property owners for decades. They instead proposed increasing income taxes and adding an annual .4% wealth tax (excluding real estate, naturally). Under the proposal, former residents would continue paying this wealth tax for ten years after leaving the state. San Francisco also recently passed an "Overpaid Executive Tax".
If your goal is to build substantial wealth, you should think twice about spending time in California. Even if you aren't directly affected by these taxes yet, high earners and wealthy people who create jobs and fund the government — tech executives, venture capitalists, and angel investors — are leaving the state and bringing their HQs with them.
Yes, property taxes are a little higher in Texas than in California. And they can increase every year because Texas doesn't have anything like Prop 13. But property taxes at least create positive incentives for society while income taxes do not. Income taxes reduce the incentive for people to work and create value. Property taxes increase the incentive for land and housing to be used efficiently, leading to appropriate levels of housing development, which makes housing more affordable, unlike how it works in California where nothing gets built. Homelessness is rampant in California largely as a result of the undersupply of housing.
Texas believes in working with entrepreneurs to attract jobs. California views entrepreneurs as exploitive nuisances rather than drivers of prosperity.
Travis County, despite being the most progressive county in Texas, recently approved a tax inventive for Tesla to build its next gigafactory there, which will create 5,000 new jobs. By comparison, in May, when Elon Musk brought his employees back to work in Tesla's Fremont factory, having already developed a COVID mitigation strategy in China, Lorena Gonzalez, a California assemblywoman, literally tweeted "F*ck Elon Musk."
California and its cities regularly intervene in their local economies, often creating perverse incentives with negative economic consequences:
- AB 5 almost resulted in Uber and Lyft shutting down in the state, which would have made it much harder to get around and put all rideshare drivers out of a job. This was narrowly avoided by an expensive campaign to pass Prop 22.
- California passed a statewide rent-control law.
- San Francisco passed a delivery fee limit and established an "Office of Emerging Technology".
- San Francisco's solution to homelessness amid the pandemic was to place homeless people in hotels and give them free drugs.
- California passed Prop 47, which legalized shoplifting up to $950, resulting in an increase in shoplifting. Basic essential businesses like Walgreens have started to leave San Francisco.
There are many examples of how dystopian San Francisco has become as a result of how it's managed, but as one recent example, a restaurant put up plastic geodesic domes to shield diners from homeless people in Mint Plaza. Frustratingly, San Francisco voters have continued to elect people like Chesa Boudin who have made the city even more encouraging of degeneracy.
Potential as a startup hub
Amid COVID, the entire software industry has been working from home and interacting online, mostly uninterrupted. I don't see the industry going back to working in offices for at least another year. The downsides of sending knowledge workers back to the office far outweigh the benefits. Companies like Twitter and Coinbase are allowing people to work from home permanently. As a result, many people are taking advantage of this freedom and relocating to less expensive, less dense, better run places.
According to one survey, for those who have decided to move away from establishment cities like San Francisco, New York, LA, and Chicago, Austin is the top choice. A number of well known entrepreneurs like Elon Musk, Joe Rogan, Joe Lonsdale, Peter Attia, and Tim Ferriss have left California for Austin. More broadly, Austin has the fastest growing population in the US. The Austin area is the Schelling point for Americans who are fed up with cities that are dying of self-inflicted wounds; people of all political leanings who just want to do business and have more freedom. It also happens to be in the center of the country — a short flight back to any of the cities that everyone is fleeing.
The existing tech network in Austin is pretty strong. Companies like Apple, Google, Facebook, and Amazon have been expanding in Austin for years, attracting many great engineers to the area. VC investment in Austin startups has also been trending up. While Austin is still much smaller than Silicon Valley (at least before everyone started leaving), it has a lot of potential, and many great companies have been started here.
Despite all the hype around remote work, I still believe that working together in person is advantageous, especially in the early stages of a startup. Animal energy is created when you work together in person, pushing everyone to aim higher and work harder; it's much more difficult to create that vibe when everyone is working from home. Considering the substantial existing tech network in Austin, Texas's business-friendly and economically-free environment, and the ongoing immigration of people who are attracted to this environment, Austin will be a better place to build an in-person team than Silicon Valley in the coming decade.
Land is a much better value and has more upside in Texas. In the Austin area, large plots of land that are close to the airport, downtown, and other commercial areas are easily affordable to people accustomed to California prices. There is plenty of undeveloped land. As more people continue moving to Austin, driving the development of more transit infrastructure, such as a new rail system recently approved by Austin voters, this land has real upside.
Amid COVID, having private property is great. You can buy a house on a decent sized lot near Austin for the same price as a condo in the Bay Area. More land means more privacy and more freedom. You can build buildings, raise livestock, grow vegetables, hunt, drive ATVs, host a group, etc. without your neighbors even noticing. You can move around outside without a mask.
With the police being defunded in America's establishment cities, it has become more important to take matters into your own hands when it comes to self-defense. Yes, Austin has also started to defund their police. But unlike blue cities in blue states, Austin is located in a red state that will step in when necessary, and where the law is heavily on the side of the defender.
In California, you're strictly limited on what type of guns you can own and will be punished for defending yourself unless you comply with complex rules. If you end up on trial for defending your family with a gun in the wrong way, your jury will probably consist of people who would prefer to abolish the Second Amendment.
Living in a progressive area of a conservative state is ideal if you want cultural diversity. From where I live, I can drive towards Austin to enjoy great international food, get an amazing cappuccino, stop by Whole Foods, or get Korean groceries at the enormous H Mart. I can drive the other direction for authentic BBQ and Southern food, huge outdoor breweries and distilleries, and shooting ranges. Leading up to the 2020 election, there were not just Biden signs, but Trump signs. I regularly interact with fine people on both sides.
Austin is also a great place to start a family. I'm still a few years away from sending kids to school, but Eanes ISD is one of the top school districts in the US. Every other top 15 school district is in Illinois, New York, Pennsylvania, or Ohio. As a couple who really hate cold weather, we wouldn't want to have to spend winters in any of those places for the next 20 years. Who knows — the good schools might all be online within a decade. But it's good to have the option. The Austin area also has a lot of family-friendly restaurants like Jester King Brewery and Alice's Restaurant which are set on large, open properties where kids can run around, pet farm animals, and be free.
Climate and natural disasters
Most people think that California's weather is unbeatable, but I don't think Texas's weather is much of a downgrade — if not an improvement if you enjoy a hot summer. While California has amazing weather, it lacks warm mornings and nights. In Texas, given the heat and humidity, you can stay outside comfortably for hours into the night. Since we moved here in August, the weather has been pretty similar to rural California's. It's mid-November now and has been 75 degrees and sunny all week. Experiencing (mild) seasons is actually kind of fun.
That said, the best weather in the world counts for nothing if you can't go outside. California's wildfire problem only seems to be getting worse with every passing year, mostly because of poor forest management. This year's wildfire in California destroyed over 4M acres. By contrast, Texas's largest ever wildfire only destroyed only 34K acres — over 100x less.
When there's a major wildfire in California, the air becomes extremely polluted, worse than anywhere else on earth. Air pollution causes permanent brain damage. It's extremely bad for you to go outside or even to be inside without diligently filtering and monitoring your air. Exercising is out of the question. The wildfires have also forced controlled blackouts that last days. The combination of brain damage and lack of electricity makes California a pretty unproductive place to be during wildfire season, to say the least.
If that wasn't bad enough, California wants to ban gas-powered cars and stoves, making people even more reliant on its spotty supply of electricity. Meanwhile, Texas has its own highly reliable power grid. How cool is that? Texans are also installing solar panels at an increasing rate, taking advantage of the sunny climate to make the air even cleaner and make their power supply even more robust.
Earthquakes are also a risk in California.