Amid raging wildfires, rolling blackouts and a worsening coronavirus outbreak, it has not been a great year for California. Unfortunately, the state is also reeling from a man-made disaster: an exodus of thriving companies to other states.
In just the past few months, Hewlett Packard Enterprise Co. said it was leaving for Houston. Oracle Corp. said it would decamp for Austin, Texas. Palantir Technologies Inc., Charles Schwab Corp. and McKesson Corp. are all bound for greener pastures. No less an information-age avatar than Elon Musk has had enough.
Silicon Valley’s high-tech cluster has been the envy of the world for decades, but there’s nothing inevitable about its success. Building such agglomerations is exceedingly hard, as much art as science. Low taxes, modest regulation, sound infrastructure and good education systems all help, but aren’t always sufficient. Once squandered, moreover, such dynamism can’t easily be revived.
In recent years, San Francisco has seemed to be begging for companies to leave. In addition to familiar failures of governance – widespread homelessness, inadequate transit, soaring property crime – it has also imposed more idiosyncratic hindrances. Far from welcoming experimentation, it has sought to undermine or stamp out home-rental services, food-delivery apps, ride-hailing firms, electric-scooter companies, facial-recognition technology, delivery robots and more, even as the pioneers in each of those fields attempted to set up shop in the city. It tried to ban corporate cafeterias – a major tech-industry perk – on the not-so-sound theory that this would protect local restaurants.
These two traits – poor governance and animosity toward business – have collided calamitously with respect to the city’s housing market. Even as officials offered tax breaks for tech companies to headquarter themselves downtown, they mostly refused to lift residential height limits, modify zoning rules or allow significant new construction to accommodate the influx of new workers. They then expressed shock that rents and home prices were soaring – and blamed the tech companies.