You may have heard the news that Tesla head man Elon Musk has decided to move from California to Texas. While Musk’s personality is not to be ignored, especially given his recent clashes with California governor Gavin Newsom, the move is part of a broader migration of companies from California to the Lone Star State.
Perhaps you’ve followed Elon Musk’s top successes and failures. If not, keep reading to learn more about who Musk is, what his businesses are all about, and how he’ll succeed in the great state of Texas according to BBC, Observer, and the SF Chronicle.
27. Second-Richest Person in the World
To many, Elon Musk is the classic eccentric billionaire. He insists on doing things his way, even when it doesn’t make sense to the people around him. His way included starting an internet company that allows people to transfer money and buy things online without revealing personal information. It was PayPal, one of his first ventures.
But the real success of Musk is his Tesla car company, which makes fully electric vehicles that can be recharged with solar power. With the collapse of the fossil-fuel industry accelerated by the global pandemic, Tesla has grown many times over in the past few months. Because of this growth, Musk is now the second-richest man globally only behind Amazon founder Jeff Bezos.
SpaceX is Musk’s company that he built to bring back interest in space exploration. He wanted to help develop an oasis on Mars and turn humanity into a space-faring civilization, but buying rockets from places like Russia was too expensive. So he founded SpaceX to build the rockets.
There’s also Tesla, his electric vehicle company. Musk was an employee at the company long before he became the CEO, and he envisioned that it would begin producing the electric cars for which it is known today. The Boring Company is one of his ideas that has yet to get off its feet. The idea is to drill tunnels to create a new underground network to connect people better. Currently, the cost of drilling is too high for The Boring Company to be successful.
Driving from Silicon Valley in the San Francisco area down to Los Angeles, a famously well-traveled route in California, is a drag on the best of days. Add in the traffic, wear and tear on your car, and construction work, and no one wants to make that drive. Also, trains are expensive and slow.
Musk conceived Hyperloop to provide high-speed transportation between San Francisco and Los Angeles through high-pressure tubes underground. Hyperloop has been in the concept stage for nearly a decade now, although Musk has solicited ideas for building the pods that would carry the travelers. The goal is to create multiple Hyperloops between major metropolitan areas including New York City and Washington, DC.
One of the pressing ethical questions regarding Artificial Intelligence, or AI, is how to keep computers from taking over civilization like sci-fi movies where robots overrun the future. OpenAI is Musk’s attempt to resolve that dilemma by developing AI in a manner that serves humanity without the risk of taking it over.
The company has the goal of making AI accessible to everyone so that it does not remain in the hands of a few upper-level scientists and power brokers. By democratizing the technology, it will be more challenging to manipulate.
Neuralink is another AI company that works alongside OpenAI to link human intelligence with artificial intelligence. Musk claims that Neuralink is developing technology that can be implanted into the human skull to increase intelligence and cure many diseases including paralysis and deafness. Neuroscientists at MIT take issue with claims regarding Neuralink and see them as speculative at best.
Despite some highly speculative ventures that may never provide any payback or profit, Musk has built many factories, particularly around Silicon Valley. The Tesla factory in Fremont, California, alone employs 10,000 people. In 2017, Tesla employed over 20,000 people in California and indirectly created as many as 50,000 jobs.
Tesla is easily the most visible and most profitable of Musk’s companies, but his AI companies, Hyperloop, and primarily SpaceX employ plenty of other employees. Musk’s empire in Silicon Valley is comparable to internet giants like Facebook and Google. Musk has many people on his payroll.
Jobs mean taxes, and high-paying jobs mean higher tax brackets. By bringing so many highly skilled workers to California and paying them Silicon-Valley salaries, it translates into employees spending more money in taxes, Musk has contributed significantly to California’s economy. The people he has brought there have spent a lot of money. That money re-circulates in the economy and provides more jobs for more people.
However, California’s governor, Gavin Newsom, and Musk have repeatedly butted heads, particularly over how the coronavirus pandemic should be handled. Moreover, while Musk is certainly innovative and creative – values essential to any growing economy – he’s too eccentric for many.
An opinion article in the San Francisco Chronicle was entitled “Thank You, Texas, For Taking Elon Musk.” The writer claimed that Musk’s companies had received windfalls of cash from the government (government assistance was the only thing that kept Tesla solvent during the financial crisis following the 2008 housing market crash) but that he has not reciprocated with good citizenship.
California does have higher regulations on businesses than Texas and other conservative strongholds. These regulations are part of a larger social safety net that helps promote all Californians’ well-being regardless of income. After receiving numerous government handouts, the writer claimed that Musk turned around and flouted many of the regulations that the same government applied.
Musk takes what he can get and expects everyone to have his back. Some of Musk’s projects, including the Hyperloop, look like attempts to privatize services the government is supposed to provide so that those services become for-profit and are only accessible to the wealthy. As such, the writer claimed that Musk is the star of corporate welfare,and will expect Texas to catch him when his companies don’t deliver.
The most recent head-butting between Musk and California’s policies concern the coronavirus. Musk promoted conspiracy theories that suggested the virus was not harmful and was little more than a cold. He demanded that the United States reopen its economy, with or without any pandemic, to preserve democratic freedom.
Alameda County, where the Tesla car factory is based, had some of the highest restrictions in California during the first few months of the crisis. Musk went beyond promoting conspiracy theories and unlawfully reopened his factory, exposing all of his workers to the virus. Knowing that his actions were illegal, Musk insisted that it should be him and him alone if anyone is arrested.
California’s governor had to walk a thin line knowing that Musk does employ many people throughout the state. His handling of the dispute with Musk will reverberate whether or not people will see California as a business-friendly state. Ultimately, Musk did not face any charges for defying the law and reopening his factory.
However, he did object so vehemently to strict restrictions by Governor Newsom and especially Alameda County that he threatened to leave California in protest. That was back in May, and in December, he made good on his threat. There were likely other factors that led Musk to leave California, one being that Texas does not have a state income tax. Additionally, Musk already has two SpaceX facilities there. Many other tech companies are also relocating from California to Texas.
In the op-ed from the San Francisco Chronicle, the writer claimed that California already has enough billionaires. Many of these billionaires live in Silicon Valley and Los Angeles, and their corporate empires drive up the cost of living for everyone around them. Young Californians have been relocating to places like Texas simply because their home state has become too expensive for them.
With the coronavirus pandemic, the writer saw his behavior as erratic and uncooperative to downright cruel. He had previously received state money and then turned on the very regulations that helped provide his own safety net. Nevertheless, with coronavirus, he threatened his workers and their families’ lives by forcing them to return to the factory.
Hewlett-Packard is one of many tech companies that recently decided to capitalize on Texas’ loose business regulations, lower taxes, and more affordable cost of living. Oracle, another tech company, also left its roots in Silicon Valley for the Lone Star State, and the CEO of DropBox recently relocated to Texas. McKesson (a pharmaceutical company), accounting firm Charles Schwab, and juice seller Jamba Juice recently left California for Texas.
While Musk said his decision to move to Texas was due to how the governor handled the coronavirus shutdown, editorials across the country saw the move as a snub to Silicon Valley. It was just another a long list of migrations from California to Texas. Musk was already building a Tesla factory in Texas and already has two SpaceX facilities there.
In 2020 alone, at least 39 major companies relocated to Texas’ capital city of Austin. Those companies included e-cigarette manufacturer Juul, venture capital funds, and start-ups. All of these businesses are inherently risky; venture capital funds bet on the success of start-ups, start-ups are risky, and e-cigarettes have faced bad publicity, bans, and lawsuits.
ShutterstockTexas has lured these companies with cheaper cost of living, fewer regulations, high level of diversity, and lower taxes. Musk’s journey to Texas was much more well-paved and better planned than many assume.
California has some of the strictest regulations for fossil-fuel emissions in America. Major urban centers, especially Los Angeles, are prone to becoming covered in smog. California has been pioneering clean energy and regulating the amount of sulfur present in fossil fuels to decrease its pollution problems. The state was also much swifter and stricter regarding coronavirus lockdowns than many other states.
Texas is the opposite. While California’s economy is moving away from fossil fuels, a move that favored Musk’s Tesla, Texas’ economy is still firmly invested in oil. There are far fewer restrictions on businesses in Texas, including how much pollution they can emit. Also, unlike California, Texas had a very lax coronavirus approach. How will this lack of regulation in Texas benefit Musk? After all, the push to move California away from fossil fuels bolstered Tesla and Musk was a leading innovator in renewable energy. Texas’ lack of regulation may ultimately prove to hurt Musk.
As part of its move away from fossil fuels, California provided tax credits for clean energy. Many Californians bought Tesla automobiles because they were being subsidized through the government with these tax credits. Moreover, Tesla received credits it was able to sell for a profit. Those subsidies will either be much lower or nonexistent in Texas.
Business regulations in California also enabled Musk to secure several low-interest loans that helped him either start new companies or helped his existing businesses remain solvent. What will happen to him in Texas, where he’s unable to receive these benefits?
Musk may quickly find that California’s regulations, which he’s consistently flouted, were the best thing that ever happened to his companies. Indeed, there were times that the corporate subsidies the state provided were the only thing that kept him solvent.
AT&T, Dell, JC Penny’s, Exxon-Mobil, Southwest Airlines, American Airlines, Philips 66, and hundreds of other major companies have been in Texas for decades. The oil wealth that came to Texas at the beginning of the twentieth century caused the state to promote policies that would favor businesses, enticing them to relocate. Oil and gas companies, in particular, have thrived in the Lone Star State.
For the past few decades, companies have been moving from crowded cities in the Northeast and California to Texas where it’s much more spacious. So today, if you drive through a major Texas city like Dallas, San Antonio, Houston, and Austin in particular, you’ll see the headquarters for many multinational corporations.
Musk’s businesses are built with the idea of moving away from the oil and gas that have contributed to California’s heavy regulations and Texas’ oil-based economy. The state won’t likely to offer the same tax credits to residents who buy electric cars to find less of a market for his cars in Texas. That may ultimately become a non-issue as Tesla has been growing worldwide.
Its market share has increased significantly with the collapse of the fossil-fuel industry during 2020 and concerns over climate change. Fewer drivers of Teslas in Texas won’t make much of a difference.
What may become an issue is his eccentric style of doing business. Musk is a true visionary. He gets an idea and then figures out how to turn it into a reality. Along the way, he meets multiple failures, learns from it and then keeps moving. Nevertheless, multiple failures costs money. Furthermore, California’s government provided a lot of that money precisely because it has so many regulations. Texas is not likely to be forgiving. True, many high-risk companies have relocated to Texas. However, Musk’s companies are of an entirely different order. He is trying to colonize Mars. The state of Texas is unlikely to help him pay for that.
Texas’ senator Ted Cruz has tweeted, “Texas loves jobs & we’re very glad to have you as a Texan.” Furthermore, as the world enters a post-covid economy, those jobs will prove to be precious indeed, especially if they are from a car company that does not utilize fossil fuels.
Musk is building a Tesla factory near Austin. With the immense recent growth of Tesla, that factory could employ tens of thousands of people. There is doubt about whether he will continue operating the Fremont factory in California. If he relocates it to Texas, the move will mean another 10,000 jobs.
One concern is that Musk has not been delivering on his promises. He already has two SpaceX facilities in Texas, but they have not provided the employment and economic boom that qA expected. Another concern is that many of the jobs created by Musk’s empire may not go to Texans. If the Fremont factory relocates to Texas, many of its workers will likely relocate with it.
So, bringing a factory from California to Texas won’t mean added jobs for Texans, but local economies will have to absorb thousands of new residents quickly. Furthermore, other tech companies require highly-skilled people who have to be recruited from all over the country (even worldwide), not from localities. Texas may not see much return on the investment it makes in Musk.
A more local concern is that SpaceX is taking over the small communities of South Texas. One of the facilities is near South Padre Island’s vacation area, spotted with small towns. Those communities are already seeing floods of tourists due to SpaceX, and the city of Harlingen near the Mexico border is seeing many new hotels pop up. Some see that massive economic growth as positive and look forward to the rise in tourism.
But people who live in tourism economies, such as in Europe and New York, will quickly say that the price an area pays for tourism is sometimes too high. Tourists often have little regard for local culture, and sometimes bring more money to tourism companies than to local economies.
Texas may soon learn that it is merely unable to adapt to multi-billionaires, especially not those as eccentric as Musk. To be sure, Texas has its own share of billionaires, many of them connected to the state’s gas and oil industry. However, Musk is the second-richest man in the world.
He starts companies with little more than an idea and government subsidies. Sometimes, those companies succeed. When they do, they succeed very wildly. Nevertheless, others, such as Hyperloop and Neuralink, remain little more than speculation years after their founding. How is a state that is notorious for less business regulations responding when Musk needs a bailout? Texas is attracting a lot of Silicon Valley companies.
Silicon Valley has long been the home of enterprising techies and corporations. However, the place may have passed its prime and is now being plagued with problems related to its massive growth over the past few decades. Those problems include inflated property values that make moving there and raising a family quite difficult. While tech workers themselves can sometimes afford the high cost of living because of their generous salaries, the same cannot be said for those who provide services basic to any modern economy.
When these employees have kids, they need things like daycares and preschools. Daycare teachers often make little more than minimum wage, and even with the higher amount that tech employees can pay, daycare teachers need to be making hundreds of thousands of dollars a year just to make ends meet. In other words, the growth of tech companies in Silicon Valley may have been too successful for their own good. People employed by tech companies need more than a job and a house. They need an economy that they can participate in. Yet Silicon Valley is too expensive for a basic economy.
California proved to be a beneficial place for Musk to begin his companies. The state was willing to provide him with the assistance he needed to keep them solvent during the Great Recession. Furthermore, California’s move away from fossil fuels helped Tesla vehicles become popular there.
Texas will undoubtedly be different from California, and that’s the point. The question is if Musk will be able to adapt his style to operate his businesses in a place that does not provide the same corporate subsidies.
Musk’s decision to relocate to Texas was likely unrelated to his public dispute with how California’s governor handled the coronavirus lockdown. There’s no question that Musk and Gavin Newsom did not get along.
Greg Abbott, the current governor of Texas, may find that he is criticized by Musk just as much as Newsom. However, maybe he and subsequent governors, will be able to develop a harmonious relationship with the eccentric billionaire. After all, Texas’s government does want Musk to succeed as long as that success means jobs for Texans.
Musk’s criticisms of Newsom put the California governor in a precarious position. If he agreed to allow Musk to reopen his factory despite the state lockdown and the danger his employees faced, he would appear soft on those who broke the law. Moreover, if he made the factory close, he would make California seem like a wrong place for business at a time when Silicon Valley businesses are migrating to Texas.
Texas’ governor may find themselves in a similar situation if there is a heated debate with Musk. Texas wants to continue attracting multinational corporations, but will the governor do so at the expense of unlawful business operations?
Texas’ lack of regulation may ultimately prove to be good for Musk. His SpaceX facilities benefit from the lower population density, and local governments have allowed test launches from the sites. Furthermore, Texas’s lower taxes may mean that he does not need the same bailouts he needed in California.
The cheaper cost of living in Texas may be the real game-changer, not only for Musk but also for all of the Silicon Valley companies moving there. Many young techies cannot relocate to Silicon Valley, despite the high salary offered, because they cannot afford the move. Having a lower cost of living might just be the key.
Musk’s corporate empire was born in California, but he no longer sees it as a place where his businesses can thrive. Perhaps they did remain in their infancy there. Yet his complaints about having to temporarily shut down his factory,when people all over the world were losing their jobs, came across to many, specially many Californians, as infantile.
However, maybe those companies will progress from infancy on through the tumults of adolescence and into maturity and adulthood in Texas. There, they will have to stand on their own without the credits and subsidies provided by California. Maybe Musk will rise to the challenge operating in Texas.
To succeed in Texas, he will have to manage what he was ultimately unable to do in California. That important goal is to win over the people who live there. In South Texas, where small communities live precariously close to his SpaceX launching sites, he will have to acknowledge and mitigate the potential for harm caused by failed tests. And then, even if those tests don’t fail, Musk will have to make them less of a nuisance.
Musk will have to become less of an eccentric, Silicon-Valley billionaire and more a down-home Texan, and more than in name alone He will have to recognize his companies’ impacts, including the adverse effects, and work with local communities to address their concerns.
Musk may not entirely be ready to succeed in Texas, but few Texans want to see him fail. Suppose he can successfully migrate his companies from California to Texas to contribute to local economies without the nuisance that some communities have been complaining about. In that case, tens of thousands of people in the state will benefit.
With Musk’s help, Texas could begin to move away from the oil that has long underpinned its economy and embrace the clean energy of Musk’s companies. Nonetheless, a successful relationship with Musk and Texas won’t just happen; he’ll have to work for it.