#34 - Leaving Silicon Valley

A mass tech-xodus

Some progressive politicians really hate tech. Here’s Lorena Gonzalez, a current member of the California State Assembly, back in May:

And here’s Elon Musk responding in typical Elon fashion:

For me, Musk’s response elicited few laughs, but the even funnier thing, the icy on the cake, the big middle finger to the state of California, came this past week, when Elon Musk announced that he left Silicon Valley for Texas. It’s a bit ironic—Silicon Valley, a place built on the backs of strange, wild-eyed, dangerously-optimistic innovators, just lost one of its (and indeed, the world’s) foremost innovators. While Musk may have been embraced in the Silicon Valley of the 1960s, he’s shunned by the Silicon Valley of the 2020s.

But Musk is not an outlier in choosing to leave. Indeed, he’s just the latest among a trend of tech heavyweights in moving out of the San Francisco Bay Area. A few weeks ago, Keith Rabois, a partner at Founders Fund, announced that he was taking his talents to South Beach, Miami. Rabois’ buddy Peter Thiel moved out of Silicon Valley to Los Angeles back in 2018. Alex Karp, CEO of Palantir, stated in the Palantir S-1 that he was relocating the company to Colorado. And Jack Dorsey, CEO of Twitter and Square, planned to move to Africa before the pandemic struck.

This should be concerning for the Valley, as we may be currently in the initial stages of a mass tech exodus. On one hand, San Francisco is a mess. California politicians hate tech on principle; homelessness and property crime are sky-high; housing is unaffordable; congestion is problematic; people are not intellectually or politically diverse. On the other hand, cities outside of San Francisco are becoming increasingly attractive. States like Florida and Texas have no state income tax; remote work is increasingly feasible thanks to the rise of videoconferencing apps like Zoom; politicians actually want tech to go there and thrive. California is collapsing under its own weight as its politicians engage in useless blood-letting instead of actually treating the underlying diseases. Meanwhile, other states are getting comparatively leaner and more able to attract tech talent.

But the point of this post is not to dump further on Silicon Valley. While much ink has been spilled on the merits of leaving Silicon Valley, I wanted to offer my perspective on three adjacent points that fewer people are talking about.

First, I wouldn’t count Silicon Valley out just yet. We hear about the big names (e.g., Musk, Rabois, Thiel, etc.) moving out, but we hear little about whether the less-well-known-but-still-influential engineers, businesspeople, and founders are choosing to remain in the Valley. Indeed, the power of Silicon Valley comes largely from its strong network effects: As more smart people go to the Valley, the more valuable the Valley becomes. More fruitful, serendipitous interactions —> More companies get started —> More investors and more talented people —> More fruitful, serendipitous interactions. It’s a virtuous flywheel. In spite of all of the Valley’s flaws, perhaps its network is still necessary for the vast majority of techies. That is, perhaps the Musk-tier heavyweights can afford to leave the Valley because they already have the network, or because they have no need for it, since their names are powerful enough already. Anecdotally, COVID-19 has prompted some engineers I know to leave the Valley, but will people come back when things are more back to normal? Does the virtualization of the tech network obviate the need for a physical network like the Valley? And are the departures of Musk-tier heavyweights enough to get the flywheel spinning in the opposite direction?

Second, as a general matter, I nevertheless really hope more people leave Silicon Valley. Or, perhaps more precisely, I really hope more Silicon Valleys are started across the United States. For one, different cities, each with different cultures, will foster different types of innovation and different types of companies. For example, it’s no surprise that Los Angeles, a city driven by film and media creativity, fosters a company like Snapchat. It’s also no surprise that D.C., our political capital, is home to most of our govtech startups. One has to wonder whether a highly concentrated Silicon Valley is actually foreclosing certain types of innovation and whether the diffusion of talent across dozens of cities in America will actually produce new solutions. This will, in turn, spur economic growth across America. Furthermore, to the extent you buy the hypothesis that the high concentration of elites in coastal bubbles is contributing to political polarization, perhaps we’ll see political collaboration go up as the elites move to the centers of America.

Third, I wonder whether some of the ills of Silicon Valley are inevitable—whether the “new” Silicon Valleys of America (like Musk’s Austin or Rabois’ Miami) will inevitably suffer a fate similar to that of today’s San Francisco. Indeed, while I don’t agree with Lorena Gonzalez’s hatred for Elon Musk, I don’t think she’s a completely irrational woman in emphasizing some of the downsides technology has wrought on San Francisco. For instance, the warp speed explosion of wealth has widened the rift of inequality, displaced people from their homes, ballooned the cost of living, and put people into poverty. It’s not completely unreasonable to think that rapid technological growth might do the same to other cities in America. That said, one also has to wonder whether the pathologies of San Francisco are due to its incredible pace of innovation, or actually due to the failure of government to keep up. For instance, many of the zoning laws are woefully inappropriate for the 21st century. In 70% of the land mass of San Francisco, it’s illegal to build anything other than a single-family home or a two-unit building. And it’s not even like tech doesn’t care about all of this—tech cares, a lot! Facebook, Google, and Apple, for example, have donated billions of dollars to San Francisco but can’t really make a more direct impact—by actually building new housing themselves, for instance—because laws place such onerous restrictions on new supply. At the end of the day, I’m optimistic that new epicenters of technological innovation can be more prosperous and safe than the current Valley, but much of that will depend on collaboration between tech and local government.


📚 What I’m reading

  1. ‘This Is Insanity’: Start-ups end year in a deal frenzy. Did you see DoorDash and Airbnb this past week? Incredible. (New York Times)

  2. We read the paper that forced Timnit Gebru out of Google. Here’s what it says. The backstory: Timnit Gebru is one of the top AI & ethics researchers, and she recently got fired by Google due to a a conflict over paper she coauthored. (MIT Technology Review)

  3. The regulator’s puzzle. Each piece of tech regulation comes with a host of tradeoffs and will likely involve a number of different agencies. How do you even start thinking about how to regulate tech? (Benedict Evans)

  4. 1956: Science and our times. Back in the 1950s, Robert Oppenheimer, famed physicist and father of the atomic bomb, wrote a prescient post about science and our future. (The Bulletin)

  5. What will happen to cities in 2021. (The Atlantic)

  6. Lawsuits filed by the FTC and the State Attorneys General are revisionist history. Facebook’s public response to the FTC and 40+ states suing it for violation of the antitrust laws. (Facebook)

  7. Fixing the mass transit crisis. (Slow Boring)

  8. Supreme Court unanimously denies Texas emergency relief, refuses to grant motion for leave to file. (The Volokh Conspiracy)