>Contrary to the prevailing perception of business dysfunction and exodus of people since the start of Covid-19 pandemic, the San Francisco Bay area accounts for 78% of the market capitalization of all publicly-traded companies in California, up from 70% five years ago.
In essence, tech is fueling California more so than anything else, from what it seems. The growth is almost entirely due to tech industry wins.
It'll be interesting to see what it is like 12-18 months from now, because the headwinds in tech are just starting to roll in full force before these statistics were finalized. California may see a bit of a down round next year.
I will say though, despite a very lopsided and sometimes actively regressive tax structure and real estate problems in California, it does seem that this is still one of the best places in the world to grow a technology business. Non SV VCs never materialized with the strength the Silicon Valley VCs still command.
I think Oregon and Washington are also seeing a pretty strong outgrowth from this, but at a much smaller scale.
I feel like most of Texas tech scene wins have come from companies want to take advantage of the tax structure, and not from structural growth afforded to the region by lush VCs and risk taking entrepreneurs. Doesn't mean they don't exist (they really exist everywhere, see Mailchimp for instance) but it just isn't the same ballpark.
It seems Texas has mostly only attracted well established companies looking to take advantage of structural tax advantages rather than growth opportunities.
Of course, you may ask, why am I choosing to single out Texas? Because they made very public statements about coming after and luring in California businesses, especially tech businesses. Its clear that they didn't really put a big dent in this.
The dysfunction is concentrated in the city of San Francisco. The wider Bay Area is not as bad. Also, attributing the whole market cap or revenue of a multinational corporation to its headquarters is not really the best way to measure things.
Also, this is a lagging indicator. A lot of this growth is occurring in companies that were founded before the worst dysfunction occurred. It doesn't mean dysfunction is not here now and won't affect future growth.
It'll be interesting to see what it is like 12-18 months from now, because the headwinds in tech are just starting to roll in full force before these statistics were finalized. California may see a bit of a down round next year.
To your other point, regarding headquarters not being a good measure. I think the tech employee driven inflation of housing prices in the Bay area and surrounding metros (sometimes as far out as Sacramento. For non natives, that's ~2 hours away by drive, usually a more consistent 1 hr 30 minutes by train in my experience. Some corporate buses even go out to these farther out metros to pick up employees) is strong evidence that they're still hiring pretty locally, though with remote work in stronger force than ever, it is changing a bit, but those effects are yet to be determined in the common case, but it will upend some of this, 100%
EDIT: I 100% agree about dysfunction in San Fransisco proper. Its a thing.
Yes, there is also a momentum of last 30 years of innovation and startup culture.
That’s arguably ending and dwindling down.
I hope people in Texas and Florida, maybe the Georgia, Colorado and Carolina make a stiff competition with California. It’s good for CA and good for United States.
I'd rather just see it pour into the Pacific Northwest (PNW). This is driven by personal reasons (hello from Oregon!) but also I think its an easier outgrowth for the region since a plane to Silicon Valley is much faster to arrive (its nonstop 1 hr 30 minutes from most major airports in the PNW). I also have observed that Oregon and Washington share cultural similarities to California that make it easier to integrate the ecosystems.
> In 2017 Portland ranked third. Now it has dropped to 66th out of 80. Polling in May for the Oregonian newspaper found that 53% of residents in the metro area felt safe downtown during the day; only 20% felt safe there at night.
Portland and Seattle are becoming filthy and trying to destroy themselves. I'd rather not have the same policies empowering the next age of innovation in USA. There are much better places, and much better cities than what's happening in west coast.
The nice thing is that nature will find its way, there is no skirting around the truth of what's happening.
I don't think it's politics so much. The problem with developing all or most of our software on the coasts is that a few things will happen:
- The coasts, which have a wildly different culture than much of the US if not the world, develop an outsized influence on and in software
- It removes people from their families for no reason eg: Tech is not like Wall St in the 90's where you needed to be there to be successful
- Tech is lucrative and it concentrates money in the innovation core of the US, which then prices out poorer states over time eg: How long will people in the middle of the US be able to afford the next iPhone if iPhone pricing is commensurate with the California standard of living and cost model?
Practically all tech is run by liberals, and large percentage are hard-left progressives. Their values are being pumped through the tech industry they've created and it is imposed through all platforms around the world.
I'd like to see more diversity of ideas, not some 100 people writing Twitter algorithms in SV where they have zero clue about how the rest of the world works.
Having any kind of dominant political culture at a company probably makes things pretty miserable on the whole so I empathize. I did look into what you said about politics (as opposed to culture) and you are right that a majority of tech companies are funneling money into Democratic PACs and candidates, though, I don't think many of these folks are progressives. What I do find really concerning is that most of these candidate donations are being sent to places where these companies clearly don't operate. That seems like a loophole worth closing.
On the one hand, I think it's laudable that the cities are trying to do something beyond simply incarcerating the homeless like so many red cities do. On the other, I do think they need to have a firmer hand in getting them off the streets. They need a carrot and stick approach. They need to offer temporary housing, and treatment for addiction and mental health issues. Those that refuse? Well, the stick is jail. You choose.
Regardless, living in a proto-shanty town should no longer be tolerated.
I don't think it is laudable. I'd love to move to Singapore or Tokyo where none of this drug culture is perpetuated.
Under the hood, this is a way to get party votes by instituting state dependency at tax payer's expense. It is all terrible politics. See our immigration policy. It is vote-making machinery.
I guess your point of view on this really hinges on whether you think the state should help or punish homelessness. If you're really trying to do the most good for your citizens, getting them into mental health and drug treatment is massively less costly and than leaving the matter to your police and emergency departments.
If you think that the role of the state is to simply punish, and any sort of larger scale intervention is nanny state big government, then yeah I can see how you would favor harsher treatment.
In my personal view, I don't think that helping fosters dependence. If anything, that help can be a safety net which allows them to get back on their feet and prosper. I started out my adult life on SSI disability. I got federal grants which helped me pay for my education, and trust me when I say that the state reaped a huge return on their investment when you look at the taxes I've paid over the course of my career in comparison to their initial investment. My experience definitely colours my world view.
I think the idea would be to not let homelessness happen in the first place and having strict drug laws that would severely punish people who engage in drugs. Soft-on-drug policies do not work and we've been told lies for last 30 years. The results are extremely clear. The only answer to that doesn't have to be some socialist state of affairs. Plenty of highly capitalistic societies work fine, in fact evidently far better than instituting California-style socialist state.
The whole mechanism is meant to gain votes. There is no humanity here. We have the same interests, to make better and productive citizens. Legalizing marijuana and normalizing hard drugs are doing the opposite.
In next 20 years, we are going to find out the disasters of legalizing marijuana from the standpoint of GDP per capita. It is going to decline as population revels in lethargy and lack of productivity.
So you think harsher criminal sentences for drugs is the answer to reducing homelessness? Have you not seen the broader consequences of the war on drugs since the 1970's? All one has to do is to look to Portugal as a great counter example of this.
Let's be real. The real issue isn't drug use or homelessness. Both of those are deeply rooted in mental health issues, and those aren't getting better without treatment.
Regardless, you've got the right to your own opinion, so I'll wish you well and leave it there.
Yes. We need much more incarceration that’s proportional to crime rate. We need Federal forces to step in and evacuate SF and Portland. They’re inhabitable.
This is not sustainable. The answer to increase in crime isn’t to become even softer on it. We’ve tried that since 1970’s.
The real competition is globally for California. We think and worry more about competition from Zurich, Singapore, etc. than the places you mentioned.
Those global places have world class universities that are real "threats" to California's university (Caltech, Berkeley, Stanford, etc.) and capital axis (Sand Hill et al) in the way the domestic places you mentioned are not.
If universities are the main indicator, why is cambridge with Harvard & MIT not more of a player? I don't really hear much from the startup-scene/tech-scene in Massachusetts.
Yes, one could argue, that the state of Delaware should be the world's 4th economy, since most of the Bay Area companies are registered there (alongside many others).
Can't we say that trends are roughly similar to trends observed when comparing US and Europe in past... 20+ years? Economic growth happens despite degrading social indicators?
> 20+ years? Economic growth happens despite degrading social indicators?
Where is economic growth in europe happening despite degrading social indicators? Are there really countries with significantly degrading social indicators & economic success over the last 20 years in europe? All countries I know some social indicators of are actually improving. Maybe inequality....I think that was increasing
GDP growth and general well-being are not aligned. The more $50,000 emergency room bills we print and the more $2M toilets we construct, the better GDP looks.
> It'll be interesting to see what it is like 12-18 months from now, because the headwinds in tech are just starting to roll in full force before these statistics were finalized. California may see a bit of a down round next year.
As might Germany. High energy cost hurts a lot of German industries, so it could be about "who hurts more", and I'm not sure who wins if you're looking at bureaucracy being dysfunctional.
Texas wants tech to replace some of its dependence on agriculture and oil. Comparing the two scenes seems wrong. Early on Silicon Valley siphoned talent out of Silicon Hill and adjacent businesses. It's going to take them a while to siphon that talent back to levels acceptable enough to create a growth tech economy. That means VCs, programmers, entrepreneurs, marketers, etc all have to make their way to the same-ish place in Texas. To say that businesses only go there for lax tax structure I think ignores why they left CA in the first place, which is they can't pay people enough to live there.
I feel like at some point we'll have to force the spread of tech businesses across the United States. You can already see the effect of not doing so; SF is utterly unaffordable even for techies. The standard and cost of living are obtusely different from the rest of the country. I wager there's a lot of baggage that will come with this given that economics have a tendency of not observing state borders.
Free college sounds good until you realize that only 30% of German students get to go. In California, it's 60%. Thanks to the community college system in the US, students who do poorly in high school get a chance to prove they can make it instead of having only one shot at admission.
> that only 30% of German students get to go. In California, it's 60
I have no idea what it is that you are comparing or where you pulled those numbers from. The systems are not the same and we have a lot more than "universities" for higher education, such as Fachhochschulen and Hochschulen.
There is some discussion that there are now too many in the higher education track and too few in the vocational training track. We have too few "Facharbeiter" and "Meister" for a lot of important professions for the practical work.
Personally, having done both tracks - in 1992 I obtained what would now probably be called "mechatronics engineer" after three years of training in a school and a huge chemical fiber plant for the practical on.the-job parts. Afterwards I studied CS and half of business administration. I think almost two thirds of youth every year going to higher education is way too much. Again, we have this vocational training, if there was nothing and Bachelor degrees count both as higher education and are used in place of where Germany uses our vocational training system - again, 2 to 3.5 years! - than it makes sense to get at least a Bachelor. But here in Germany I think we actually could use shifting some of those 55% into the other track.
If you get such a vocational training degree, e.g. "Facharbeiter", you are already pretty well educated and qualified. If you add a "Meister" on top of that after getting some work experience you are on a path to really good earnings and don't have to hide at all from comparisons with top engineering degree holders. Those people would not show up at all in your comparison, because you don't have that system.
The other thing to keep in mind is that German universities and US universities are very different. In Germany sports team, high-end cafeterias, student experience centers, and all the other things wealthy Americans appreciate are unknown in Germany. The focus is very much on classrooms and labs. Also, the teacher/student ratio and class sizes are much worse in Germany so it really depends on what you're looking for.
I got a fantastic ME education at a German university and I wish the tuition I pay for my kids in the US would go more towards academics and less to all the other overhead.
> teacher/student ratio and class sizes are much worse in Germany
That very much depends on the subject. In CS I even had classes that took place in the office of the professor because there only were a handful of people. For seminars we went into a hotel in the middle of nowhere for a few days with about a dozen people total.
If on the other hand you study BWL (business administration) during the first year or two it's very crowded in even a large auditorium. That's because that is what all those people end up signing up for who don't really know what they want, and "business" always is the fallback and safe choice for many. The more concrete and STEM-y your field the less of that problem you will ever see.
California has 3 of the world's top-10 colleges according to US News and World Report's questionable ranking. I'll admit CA's K-12 education leaves much to be desired. It's actually a little weird how different college and K-12 are in the state.
CA prefers to lead on insane housing prices, inequality and number of billionaires. They have played a pretty good role in environmental protections though.
Not sure how I should think about homelessness in CA. I think the problem is that the climate attracts homeless people.
Since California is not a sovereign state, this whole line of reasoning seems disingenuous. It's really an arbitrary boundary when we have free interstate commerce, and a highly interdependent economy. Where would California's economy be without the water they get from the other western states?
Here are some other arbitrary subsets of the USA that would be interesting viewed as separate economies.
- The original thirteen states.
- The Amtrak electrified rail corridor from DC to Boston
- The Mississippi watershed
- The great lakes watershed (include the relevant parts of Canada, why not?)
While you make a really good point, California contributes roughly the same as it takes from the Federal government. So if it were a sovereign state, it would be paying out basically the same thing to the rest of the US as it takes in from selling them things.
In other words, in this particular case, it's a wash.
I assume in the grand scheme of things that some prices would go up and some down on both the buy and sell side and ultimate work out in the end.
For example the water could only get so expensive before desalinization becomes cost effective. Also all the things California grows and sells to the rest of the country would include the price of water.
I think that people forget that US States are States in a Union. The Federal Government is there to regulate commerce and provide for common defense, even if it gained some extra responsibilities post-New Deal. US states have their own laws, executive, market policies, constitutions, and all; they are not just departments of the federal government. So California<->Germany seems like the only fair comparison, just as it wouldn’t make sense to compare the United States to Germany, but the EU as a whole.
Who else would they represent? Ethnic Russians instead of National Russians?
Pretending that Russia actually faced punishment for doping is asine. Russia the country had total control over what athletes were sent by ROC as well as said athletes still had to be Russians and they wore the national colors of Russia and the athletes often (always?) sang the Russian anthem for their medal (regardless of w/e music was actually being played)
I can't think of any water system in California that imports significant amounts of water. I guess people are trying to count Colorado River water as imported? Perhaps they are unaware that river passes through California.
I think most people are largely unaware of the geography of the Colorado. There is a general lack of understanding of the fundamentals of the water crisis out west. Most don't have a clear picture even of how different states draw from the Colorado for instance. And how those different methods impact watersheds and downstream infrastructure.
The lack of information actually exacerbates the entire problem out west, as people give undue concern to, say, Los Angeles. While, say, Scottsdale sits oblivious to the precarious nature of it's situation vis-a-vis water.
Unless you count the Colorado River itself as a water system. :)
I would guess that almost none of the water that California gets from the Colorado falls in California. Coloradans sure feel that the down river states don't have the natural right to water that falls on their land.
Sure, the headwaters of this system are indisputably outside California. Still the Colorado aqueduct has a capacity of just 1.2MAF, which is less than 2% of the state water consumption. The idea that California depends largely on imported water makes little sense.
This article is much like the "rich get vastly richer this year" stories that come out when the stock market rises. For some reason the opposite stories do not get written when the stock market craters because that's not "fun."
Expect "California falls to 5th place in the World's economy" articles if the exchange rate trend reverses.
I do agree that it's a very lazy form of news generation. Most of the (publicly) richest people tend to hold most of their wealth in stocks, which have always had volatile prices. So "the rich got richer/poorer" is largely synonymous with stock prices went up/down.
Exchange rates tend to be a bit less volatile, but they do fluctuate quite a bit, so that accounts for quite a bit of the changing fortunes of California vs Germany. Still, it's quite remarkable (if true) that California has similar nominal production/income as Germany which has twice the population, implying that the people are on average twice as productive.
It's interesting to see this framed, both here and in the comments, as if it's some transitory phenomenon and California may be expected to soon decline afterward. I'm reasonably sure that isn't true. I haven't lived in California in quite a while, but grew up there in the 80s and 90s and I at least think I remember them telling us in school back then that California was the world's 4th largest economy back then. It seems that it regressed a lot after 2008 because it was hit so much harder than most of the world by the housing market collapse, and it is now mostly recovered from that.
Back then, it was largely on the back of tourism, farming, and entertainment, too. Tech is a nice boon, but hardly necessary. California is not and has never been a single-industry economy, which is part of the reason it is so robust, and part of the reason it has recovered from the housing collapse better than most other places hit hard by it. Florida is another case there, with, at least for the US, much different tax policies and cultural traits, but also a very well diversified economy. It goes to show how little some of the things politicians and voters are always making a fuss about actually matter.
A lot of people don't realize that California's biggest export is actually airplanes and airplane parts. Whenever there's a war California's economy rapidly grows
The cynical me thinks this is also a pre-election (“wish selection”) PR to help promote the case for Gavin Newsom as president.
You can imagine a talking point like “under my leadership, California overtook Germany as the 4th economy in the world…”
The reality is Newsom had almost zero impact on it, his leadership should be judge by the growing homelessness issue we’ve seen in SF and rest of California and not take credit for tech economy.
Yes, solving the homeless problem is a huge and complex challenge, but the country now needs leadership that is able to solve the big challenging problem.
We’ve lost our ability to fix hard problems and we need to do that if we want to have a chance in a more competitive world.
>Contrary to the prevailing perception of business dysfunction and exodus of people since the start of Covid-19 pandemic, the San Francisco Bay area accounts for 78% of the market capitalization of all publicly-traded companies in California, up from 70% five years ago.
In essence, tech is fueling California more so than anything else, from what it seems. The growth is almost entirely due to tech industry wins.
It'll be interesting to see what it is like 12-18 months from now, because the headwinds in tech are just starting to roll in full force before these statistics were finalized. California may see a bit of a down round next year.
I will say though, despite a very lopsided and sometimes actively regressive tax structure and real estate problems in California, it does seem that this is still one of the best places in the world to grow a technology business. Non SV VCs never materialized with the strength the Silicon Valley VCs still command.
I think Oregon and Washington are also seeing a pretty strong outgrowth from this, but at a much smaller scale.
I feel like most of Texas tech scene wins have come from companies want to take advantage of the tax structure, and not from structural growth afforded to the region by lush VCs and risk taking entrepreneurs. Doesn't mean they don't exist (they really exist everywhere, see Mailchimp for instance) but it just isn't the same ballpark.
It seems Texas has mostly only attracted well established companies looking to take advantage of structural tax advantages rather than growth opportunities.
Of course, you may ask, why am I choosing to single out Texas? Because they made very public statements about coming after and luring in California businesses, especially tech businesses. Its clear that they didn't really put a big dent in this.