Dec 14, 2020 - Technology

Tech "exodus" isn't scaring Silicon Valley

Illustration of a hand cursor carrying a briefcase
Illustration: Eniola Odetunde/Axios

Silicon Valley's powerhouses aren't putting out the "moving sale" signs, even as a handful of high-profile departures raises questions about the region's status.

Driving the news: Oracle's Friday announcement that it's shifting its headquarters to Austin, Texas follows a previous move by Hewlett Packard Enterprise to Houston.

Reality check: These companies aren't shutting down their California offices. They've changed their legal addresses in part to flee the state's taxes and regulations.

  • Tesla founder Elon Musk, who has sparred with California over labor issues amid pandemic restrictions, recently announced he would move from Los Angeles to Texas, which is likely to save him a fortune in personal taxes.

Between the lines: The firms leading this wave of departures from Silicon Valley represent the industry's more conservative wing.

Think of their moves as a part of the U.S.'s ongoing "big sort," where businesses and individuals increasingly choose where to live based on their political and cultural affiliations to the "blue" or "red" tribes.

Context: Oracle is a venerable database powerhouse, but it has never vaulted into the front rank of tech industry giants. HPE is a shard of the once-mighty Hewlett Packard focused on corporate hardware and services. (The rest of the old Hewlett Packard remains in the Valley.)

  • You won't find anyone on Sand Hill Road who believes these firms' departures say anything about Silicon Valley's capacity to keep innovating.

The big picture: The "tech exodus" from the San Francisco Bay Area is a permanent feature of the Silicon Valley ecosystem. Every turn of the tech business cycle brings new waves of engineers, entrepreneurs and startups to the housing-starved region — and others regularly leave to make room.

  • Tech growth and startup innovation have been steadily spreading beyond Silicon Valley for decades, and plenty of other U.S. regions have tried to become silicon prairies/alleys/coasts/deserts.
  • As Axios' Jim Vandehei and Mike Allen argue, America's dispersed urban centers will be the laboratories for many of tech's most world-changing new industries, including 5G, autonomous vehicles, and "smart cities" systems.
  • Other burgeoning waves of tech, from AI to the cloud industry to quantum computing, are more likely to advance inside tech-giant campuses.

Yes, but: Tech growth has actually become more concentrated in five leading coastal metropolises (San Francisco, Seattle, San Diego, San Jose and Boston) over the past two decades, as Axios' Kim Hart reported a year ago.

Reproduced from Brookings and ITIF analysis of Emsi data; Chart: Axios Visuals
Reproduced from Brookings and ITIF analysis of Emsi data; Chart: Axios Visuals

The catch: New firms bubbling up in places like Austin, Boulder and other regions rarely have plans or hopes to become the next tech giant.

  • For most, the game-plan is still: Get an idea, get growth, and get bought — usually by a much larger West Coast firm.

The pandemic-driven shift to remote tech work could give other regions an opportunity to shift the industry's power imbalance. But the way many Silicon Valley CEOs see it, the change means their companies can now have the best of both worlds — in-person hubs rooted in the Bay Area's culture drawing on global networks of talent.

  • Even before the pandemic, Silicon Valley's giants were looking outside of the region for growth.
  • Apple, for example, recently opened major centers in Los Angeles and expanded operations in Austin.

The bottom line: Neither Google nor Facebook has shown the slightest public interest in moving their home bases, and Apple's $5 billion UFO-style headquarters can't exactly take flight.

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