Is California setup for a brain drain?

Texas Governor

Last week I got to meet Texas Governor Rick Perry (that’s a photo of him pointing to a picture on his office wall). The first thing he told me, after saying “I just Tweeted you” is “when are you going to move to Texas?”

Two years ago I would have laughed because California was definitely the best place to do a technology business. This year, though, it’s a little tougher to laugh at that suggestion.

Here’s why:

1. My two brother-in-laws, both engineers, are laid off and looking for work. If they found work in Texas, they’d move in a heartbeat.
2. Housing prices in Silicon Valley remain ridiculous. Yeah, on my street in Half Moon Bay there’s lots of houses for sale, but prices remain far higher than they are in Texas and other places in the world and over the hill in Palo Alto prices haven’t dropped at all.
3. The pull of VC money over on Sand Hill Road is dropping fast. Last night when I visited SmugMug’s offices CEO Don MacAskill told me he just hired some people with decades of experience and said “I never expected to be able to hire such talent.” If the stars of Silicon Valley are on the street looking for work, imagine what it’s like for regular everyday engineers.

But that’s just my stories. For California as a whole I’m sensing that the whole state is primed for a major brain drain.

Why? Our state is bankrupt. What was the response? Lay off a bunch of teachers. Our education system is already in the toilet, but this will make it worse. Other states, like Texas, that aren’t bankrupt and aren’t laying off teachers, are looking more and more attractive to parents. It’s that, or spend 10s of thousands on private schools.

There’s a general feeling that crime is getting worse. That’s part a PR problem due to four Oakland police officers getting killed last week, but how will we solve those problems if we don’t have any money to hire more cops, build more prisons, etc, etc? Callers to KGO radio yesterday made it sound like the crime problem is getting worse. Rubbed into the wound is the fact that as a state we’ve decided to stop spending money on education and I predict we’ll see the problem get even worse as uneducated kids hit the job market and find no one is willing to hire them. The crime rate is about to head up big time because of this.

Finally, entrepreneurs are figuring out that they can start companies elsewhere and do just fine. A month ago I visited Tatango up in Bellingham Washington. If you can start a startup in Bellingham you can start it anywhere. I have to admit that the small town life of Bellingham has many advantages for a startup. For one, your employees are going to be more loyal. For two, they will need less pay because housing costs 1/7th to 1/12th what it does in Palo Alto. For three, the whole community is vested in helping you out (they are the only tech startup in town).

In California’s defense, it’s still going to be hard for someone like me to leave because of the ecosystem that exists here, the weather, and generally the ability to ask anyone on the street what their Twitter address is and get back more than just a blank look, but the Texas Governor made it clear he was going to come after California’s entrepreneurs and what he’s offering workers and entrepreneurs is more and more attractive every day.

Is this a problem for California? Are we about to see a major brain drain? If we don’t fix the education problem and the economy doesn’t improve here soon to keep geeks from looking elsewhere, I’d say yes. I’m off to look at moving company stats. They are usually the first place to see evidence of a brain drain as people move out of state.

Are you seeing any evidence yet? Got family/friends/coworkers who’ve moved out of state?

204 thoughts on “Is California setup for a brain drain?

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  2. I thought I'd chime in as someone who has the unique perspective of having started a business in Arizona in 2003, moved to CA soon after because my income skyrocketed, then moved out of CA three years later (to Texas) after seeing how horrifically anti-business it is.

    For starters, this article is obviously talking about tech, but if you look up the stats, the vast majority of millionaire entrepreneurs are in rather ordinary, non-tech businesses. So all this search for the next Silicon Valley seems quite silly to me.

    Our experience in Newport Beach, CA was disappointing. First of all, the weather is crap. Sorry but it is. If I'm paying millions to live in a modest house, I want warmth and sunshine. Chilly fog for half the year is totally unacceptable given the cost of living. The myth of “great weather” in CA really baffles me and must be the greatest publicity stunt ever pulled!

    Second, we were stunned and disappointed at the dining scene. Nothing but bland corporate- or Iranian-owned chain restaurants. The reason? Because CA makes it too burdensome and expensive for a talented, created, entrepreneurial chef to open a place. Taxes, insurance, workers comp, rents, etc. In the first month on San Antonio we found more and better restaurants and wine bars than three years in Southern California – that's saying a LOT.

    And biggest of all is how FIERCELY anti-business the state is. As an entrepreneur, you are considered evil and are requested to take care of every lazy piece of garbage in the state, even if you're not doing well. And the CA FTB is notoriously worse than the IRS in abuses of power and collecting taxes.

    What I've figured out is this: People who say CA “isn't that bad” simply don't know any better. If you've eaten garbage all your life, you have no idea what good food tastes like, and therefore can't understand why anyone would go to a fine-dining restaurant. The same is true of CA entrepreneurs and business owners. You really have no idea how bad you have it and how much better things are elsewhere.

    As for us, we're thrilled to be back in a warm climate (not the lousy gray fog), to have a great selection of restaurants and wine bars, to have FRIENDLY neighbors, and to meet REAL entrepreneurs with real tangible businesses, not a bunch of posers who talk a big game but who own nothing! Oh yeah, and to be in a place devoid of the horrific 40×80 lots, the same ones even millionaires are forced to live on in CA!

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