Texas Attracted California Techies. Now It’s Losing Thousands of Them.
The “Texas Miracle” loses some of its magic as Oracle announces it’s moving its new HQ out of Austin and Tesla lays off nearly 2,700 workers.
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Texas Attracted California Techies. Now It’s Losing Thousands of Them.
The “Texas Miracle” loses some of its magic as Oracle announces it’s moving its new HQ out of Austin and Tesla lays off nearly 2,700 workers.
By Christopher Hooks
April 26, 2024 0
The Oracle headquarters on April 24, 2024, in Austin.Brandon Bell/Getty
Back in the halcyon days of 2020, a year we all remember fondly, a new flash point opened in the enduring war between Texas and California. Technologists started picking up sticks in Taxifornia and moving to the Lone Star State in greater numbers. The enemy’s chief newspaper, the Los Angeles Times, worried that Silicon Valley’s “monopoly” was over and wondered if Austin was “the future.” Governor Greg Abbott declared Texas was “truly the land of business, jobs, and opportunity.”
In the wave of stories about Austin’s ascension in 2020, there were always two pieces of evidence given top billing. That year the tech goliath Oracle relocated its HQ to Austin, where it had already built a massive campus on the south shore of Town Lake, and Elon Musk began building a gargantuan Cybertruck factory just outside the city. Austin-area authorities helped Oracle secure valuable lakefront real estate and offered Tesla some $60 million in tax abatements, including $50 million from the historically struggling school district in Del Valle. The new facilities were greeted by state officials as evidence that the “Texas Miracle” was alive and well. Abbott proudly proclaimed last year that Austin was “THE destination for the world’s leading tech companies.”
This week saw a major plot twist in that narrative: Oracle declared it was moving its headquarters to Nashville, and Tesla—the largest private employer in the capital city—announced it would be laying off almost 2,700 workers from its Austin plant after a disappointing earnings report. Texas wasn’t really at fault here. Oracle, which makes business software, cited Nashville’s strength as a center of the American health-care industry, though it surely also helps that the company is getting nearly a quarter of a billion dollars in tax breaks and incentives from the city and the state of Tennessee. Tesla, meanwhile, laid off workers across the country after the Cybertruck suffered significant quality issues that put the future of its Austin production facility in doubt. The city’s debut in auto manufacturing is a vehicle that apparently rusts in the rain. The factory complex, which Musk once promised would become an “ ecological paradise,” recently took advantage of a new state law to exempt itself from Austin’s environmental regulations.
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But while hard financial realities explain the HQ move and the layoffs, the news also evidences a moment of cultural change: the sudden hotness Austin enjoyed in 2020 has dissipated, at least a bit, into notness. In the mad summer of 2020, tech evangelist Joe Lonsdale wrote that Texas stood as a new frontier in the fight for human freedom and vowed to build a new city outside Austin to serve as a safe haven for disruptors, like other utopians who have been coming to the state for centuries. But, it turned out, after the COVID-19 pandemic, there was more utility in the status quo. When in-person work came back, rubbing shoulders in Palo Alto became more valuable to tech leaders. And while Lonsdale remains, many members of his tribe started heading home.In December, perhaps not coincidentally after Austin’s most miserably hot summer ever, TechCrunch wrote that start-ups were fleeing the city, which was “ losing its luster.” Not surprisingly, some of the Californians who moved here during the pandemic realized they had traded Edenic weather for 110-degree summers and no income tax, and they decided that the income tax wasn’t that bad. That was reflected in the tech industry’s financials. Venture capitalists invested $6.75 billion in Austin start-ups in 2021, but in 2023 they invested only $3.8 billion. (Funding also fell in Palo Alto amid an industry-wide crunch, but the Bay Area remained king by far, with companies there raising more than $60 billion in investment in 2023.)
Oracle’s decision to move its HQ out of Texas after less than four years is a reminder that trying to lasso global companies is like trying to wrestle the wind, and that the economic-development incentives that were so vaunted here earlier this century can only do so much. Austin will most likely continue to grow, of course, but the end of this particular hype cycle coincides with a ground shift in the state’s political identity.
For the first two decades of the century, what it meant to be Texan—as explained by the state’s politicians—was largely wrapped up in a feeling of competition with California. The state’s “wins” were often counted by how many new residents and companies Texas could induce to move here from the Golden State.
Governor Rick Perry was the main figure associated with this contest: he bragged endlessly about the deals he had struck with CEOs from colder and more heavily income-taxed states, and even about the rising price of in-demand U-Haul rentals from San Francisco to Dallas. He took credit for the growth of the Texas economy, the primary accomplishment of his fourteen-year stretch in office. Abbott picked up the baton, and Senator Ted Cruz has sought to share in the glory. The political culture of the state was oriented around attracting newcomers at any cost, even if the effort got a little ridiculous.