In a recent interview with Joe Rogan, Elon Musk and Rogan were talking about Austin, Texas. Musk said that the town was going to be very successful in the future, forecasting a “megaboom.” He also made comparisons between Austin and California, and warned people moving there to not recreate the problems that hurt California.
With the future of Tesla now hitched to the future of Texas, knowing whether Musk’s predictions of a bright future for the Austin area are legit is important to predicting the company’s future. Relying on my personal experience living in a place that previously got a lot of California migration, as well as economic indicators and Austin’s past, I’m inclined to agree with Elon Musk’s predictions and warnings on this.
Some Austin Tech History
While there are notable exceptions, it’s generally a good idea to look at the past when you’re trying to predict the future. As 2020 taught us, things can change rapidly and upset well-established historical trends, so we can’t solely rely on history to guide us. Even when black swans drop in, the past is still an important consideration.
The fact is that Austin has a very well-established technology industry.
The story starts over 60 years ago. Peter Ward at Culture Trip wrote an excellent article about this. While the rest of the state (with the possible exception of El Paso) was getting itself neck deep in the oil industry, Austin took a different path. In 1957, private leaders in the area established the Austin Area Economic Development Foundation. The group worked hard to attract companies working on electrical and scientific equipment.
In the following decades, the group’s strategy worked. They attracted companies like IBM, Texas Instruments, and Motorola. Those companies have since been eclipsed by other companies, but they were the high-tech titans of their time and are still influential today. Other companies like MCC and Dell followed, establishing the area as a stable tech hub.
Austin didn’t enjoy the wild success that Silicon Valley did during these decades, but Austin also didn’t exhaust itself. The Austin area’s sprawl and wide-open Texas Hill Country spaces would probably take 300 years of rapid growth to get as crowded as Silicon Valley. This leaves Austin and the surrounding areas with a very much unrestricted real estate and housing market that doesn’t price out young professionals.
All you have to do is drive through the Austin area to see what I mean. There’s still a lot of space in the area around Austin.
Today’s Economic and Cultural Indicators
Perhaps the biggest thing going on today that attracts tech businesses is the generally business-friendly environment. Lower taxes, less strict regulation, and no state income taxes make the place very attractive to the leadership of tech companies. This isn’t as universally true as the common myth seems to be, as I detailed in another article, but it does hold in general.
The area’s culture is another important factor. Nobody at a high decision-making level in a tech company is going to want to move to the Bobble Belt. The culture is just not a very good fit. Both the tech entrepreneurs and those already living in the small-town Deep South don’t like each other much. But, as Musk pointed out in the Rogan interview, “Austin is a bit like mini California.” Based on my experience with Texas (which is extensive), this is absolutely true.
You’ll see bumper stickers, T-shirts, and even the occasional billboard that says, “Keep Austin Weird.” Unlike more conservative places in Texas, there has been a vibrant LGBT community going back decades. Trendy and futuristic things are socially acceptable in Austin, while just a short drive away in smaller towns, being too trendy will get you weird looks and even mockery.
While the rural and small town parts of the state are struggling to make America great by keeping it in the 1950s, Austin’s residents usually pride themselves on trying to live in 2030 and beyond.
Another article at Culture Map gives us a number of economic indicators that the city can be proud of. It ranks just behind Silicon Valley as the second best place for tech workers, ranks as second in real estate markets, and ranks among a group of ten top cities that draw people away from coastal California and New York City.
Real Estate Is A Big Issue
Austin Business Journal gives seven reasons that Austin is surpassing Silicon Valley as a tech hub. The #1 reason is real estate.
The fact is that Silicon Valley is just too short on housing to keep growing like it has in the past. California holds 17 of the 25 most expensive real estate markets. Businesses, professionals, and students can afford to live in Austin a lot easier than they can afford to live in California. This makes it hard for new and growing companies to seriously consider starting in or staying in the state.
Geography is part of the problem, but California’s regulatory environment has often been openly hostile to building more housing or high-density housing. NIMBYism, environmental laws, tax structuring, and government entities like the Coastal Commission outright blocking new development have all played a part in destroying the housing market.
Austin has neither the geographic nor the governmental issues that prevent affordable housing, and that alone is enough to make a big difference in attracting tech businesses.
Austin Will Resist “Californication” Short Term, but The Long Term May Be Awesome For Everyone
My home state of New Mexico saw a huge influx of people moving away from California in the 2000s. When they first arrived, our new neighbors had a lot of bad to say about the state.
“Everything was just soooooo expensive!”
“I can’t believe how hard it is to do anything there!”
“I’m so glad we moved. I bought three houses here after the house in California closed!”
The appreciation of the easier life in New Mexico didn’t last long for some of them. They’d wonder why New Mexico or El Paso didn’t do things the way they did it in California. The roads weren’t good enough, so we need higher taxes to make the roads more like California. The city was at fault for the neighbor’s ugly yard, and needs to crack down because it’s hurting property values (which they want to go up). Gun laws need to change because they barely heard the report of gunfire coming from the desert where people were responsibly target shooting like they had been for decades. The dairy farm (that had been there for 60 years) they moved in next to is creating too much stink and attracting too many flies.
You see this happen anywhere that great numbers of people accustomed to California move to. People from families long living in the area start putting stickers on their cars like “Don’t California My Arizona” or “Go Back To California” or “Keep The Bastards Out.”
Californians were able to overwhelm and change places like New Mexico and Arizona rather easily because populations weren’t that high before the exodus began. The fast pace of change led to more conflict and more shock for people on both sides.
Texas is a lot bigger, and has historically been very conservative, so sweeping changes won’t happen as fast. It’s all numbers. On the other hand, Texas is slowly changing. I pointed it all out in another article, but in short the demographics are changing to where politicians like Beto O’Rourke are barely losing in statewide races. The changes seem like they will eventually come, just much more slowly.
The slow change, combined with Austin’s culture that differs from most of the rest of Texas, will probably lead to less conflict, less culture shock, and better outcomes for all involved for the area in the long run. The people moving in might even have more time to gain an appreciation for the things that makes Texas different from their home state, which would create a new culture with the best of both worlds.
Featured image by Michael Barera, licensed under Creative Commons CC-BY-SA 4.0.