John Chambers on the Silicon Valley exodus: ‘We’re in real trouble’

"The complacency is scary."

​John Chambers

John Chambers is worried about the future of Silicon Valley.

Photo: JC2 Ventures

John Chambers is considered somewhat of a legend in Silicon Valley. And he's very nervous about its future.

Chambers led Cisco for two decades, guiding the tech giant through major waves of disruption and innovation. After stepping down in 2015, he embarked on a new career as a venture capitalist, launching JC2 Ventures in 2018.

His views still resonate in tech and Silicon Valley, where he's often viewed as an elder statesman and mentor. And he has a lot to say nowadays.

In a conversation with Protocol, Chambers shared his deep concern about the future of California, and particularly Silicon Valley. He spoke of the alarming wave of departures from the region and the state, led by Hewlett Packard Enterprise and Oracle. He also shared his frustration with California's leadership and explained his decision to endorse the potential candidacy of the former mayor of San Diego, Kevin Faulconer, as the campaign to recall Gov. Gavin Newsom gains momentum.

This interview has been edited for brevity and clarity.

You endorsed former San Diego Mayor Kevin Faulconer's potential gubernatorial run. But are you supporting the campaign to recall Gov. Gavin Newsom?

Two separate items. Am I supporting Kevin? Absolutely. Am I actively involved in the recall? No. If there is going to be an election, I do think it is time for a change. I think we are in trouble in California.

At the present time, California is not a good state to do business in. It is getting worse. It used to be that every startup that I was involved in, if they weren't in Silicon Valley, they were talking about: When would they come? No one's asking that question anymore. When you see Hewlett Packard [Enterprise] leave — they were the original garage startup and the one that I modeled after culturally — when you see Charles Schwab leave, when you see Elon Musk leave himself, you realize our state has a problem and we are in denial.

The issues aren't anything to do with any political party. The issues are our regulations are non-competitive; our cost of living is non-competitive; our tax structure is the worst in the nation.

They had the golden goose, and nobody seems to care that suddenly the geese are flying away.

The implications for our state, long term, are terrible on job creation. Remember each core job in tech supports five additional jobs, everybody from the people who build houses to the dentists to the people who do the landscaping, the Uber drivers and so on.

I believe it's time for a change. It would be easy to just ignore this and just automatically go with startups moving throughout the nation. But I owe an obligation to Silicon Valley for us to know what I think the outcome will be at the current trends. Because I've seen the movie so many times before.

This is self-inflicted, entirely. It's a regulatory environment that takes business for granted: that when they pass regulations, they don't even do a study on the impact on jobs, especially startups and small companies. You can hit a big company with a billion-dollar fine and their stock probably won't even move. You hit a small company with regulations on privacy or other issues and that means they may not be able to be viable. Or they'll have to go to another state for the majority of their employees.

You have to realize this is global competition for new companies and existing companies. And we're not even competing. You're going to disrupt or you get disrupted. At the present time, we're getting disrupted at tremendous speed. And the complacency is scary.

It's too late once the jobs are gone, and then all of a sudden our kids can't get jobs in the state, regardless of where they are. It's too late when you suddenly say, my tax base got cut by 30% because the companies and employees left. If I were doing a startup today, I would go to Texas.

Is there a regulation that stands out for you as an example?

I think the effects of the privacy rules being passed. Do I believe that we've got to have privacy regulation? Absolutely. But you've got to understand the economic impact, especially for small companies. For every regulation passed, there should be an accompanying summary of what it means to jobs, especially jobs in startups.

The large companies will not add total headcount over the next decade anywhere in the U.S. There'll be some, like an Apple, that may go up dramatically, or an Amazon, but the banks, the manufacturing, the tech companies won't add [jobs] in total. So if you don't create an environment that is very friendly to small businesses getting bigger and startups getting bigger, you've got an issue coming at you.

Is it too late for California, in your view?

I think that the luster is clearly going off our star. I think we missed an opportunity to clearly lead in the next generation, which, by the way, we could have done.

Is it too late? No. But have we lost a huge amount of momentum? Yes. Is it very manageable and fixable? Yes, it is. But it requires a concerted effort starting with: We want this to be the state that does the best job creation. I believe we're in real trouble in California.

What are the implications, in your view, of the tech exodus from California? Some people would say that's actually a good thing because it creates new centers for tech.

Well, it's a good thing in that every state in the U.S. has to become a digital state and a startup state. And this is something that creates opportunities. I don't think there's any entitlement on where the future startup state will be. It's up for grabs. But right now, if you're handicapping them, you probably would handicap new players like Texas. Watch how quickly Florida has come up. You'd have to handicap it against New York and California.

What are your own initial thoughts about the Biden administration's approach to tech?

It's too early to tell. I think he has appointed people who are tech-savvy. [But] neither party ran on startups, on digitization as part of their platform. [Prime Minister Narendra] Modi did in India. [President Emmanuel] Macron clearly did in France. [Note: Chambers is an advisor to the Macron government, which named him global ambassador to French Tech. He is also the chairman of the U.S.-India Strategic Partnership Forum.]

This is our game. We invented this, and yet we're getting beat by others on it. Watch how far Texas has come in just five years. Five years. And who would have thought Montana or West Virginia would be a great place for a startup.

The U.S. needs a digital policy. France used to be the worst place in Europe to do business. They moved from a startup environment that was just terrible to the fastest-growing startup environment in all of Europe. We need to get back to a startup nation, a digital nation, and we need a national plan to go about it.

Going back to California: Are you considering moving, John?

If I were 25 years younger, the answer would be: It's my wife's decision, but I would. My brother-in-law and sister-in-law who had startups here in California, they moved to Florida several years ago.

Each of my startups that are located in California [is] considering: Should they stay here? Should they have the majority of their headcount remain in California? I don't know of a company that's not thinking about that.

What do you tell them?

Your decision. Here are the pluses and minuses.

Have you considered becoming active politically?

If I were going to be active politically I would have had to do it about 20 or 25 years ago. And I thought pretty seriously about it at that time. I had friends who encouraged that. But I'm not a political person. I like Democrats [and] Republicans. I have a great deal of admiration for Biden; I have a great deal of admiration with George Bush. And so I tend to be more focused on just getting things done. Will I, however, support, regardless of party, people whose values that [I] share? Answer: yes. I believe hugely in democracy and the faith in our electoral system.

Workplace

It's OK to cry at work

Our comfort with crying at work has changed drastically over the past couple years. But experts said the hard part is helping workers get through the underlying mental health challenges.

Tech workers and workplace mental health experts said discussing emotions at work has become less taboo over the past couple years, but we’re still a ways away from completely normalizing the conversation — and adjusting policies accordingly.

Photo: Teerasak Ainkeaw / EyeEm via Getty Images

Everyone seems to be ugly crying on the internet these days. A new Snapchat filter makes people look like they’re breaking down on television, crying at celebratory occasions or crying when it sounds like they’re laughing. But one of the ways it's been used is weirdly cathartic: the workplace.

In one video, a creator posted a video of their co-worker merely sitting at a desk, presumably giggling or smiling, but the Snapchat tool gave them a pained look on their face. The video was captioned: “When you still have two hours left of your working day.” Another video showed someone asking their co-workers if they enjoy their job. Everyone said yes, but the filter indicated otherwise.

Keep Reading Show less
Sarah Roach

Sarah Roach is a news writer at Protocol (@sarahroach_) and contributes to Source Code. She is a recent graduate of George Washington University, where she studied journalism and mass communication and criminal justice. She previously worked for two years as editor in chief of her school's independent newspaper, The GW Hatchet.

Sponsored Content

Foursquare data story: leveraging location data for site selection

We take a closer look at points of interest and foot traffic patterns to demonstrate how location data can be leveraged to inform better site selecti­on strategies.

Imagine: You’re the leader of a real estate team at a restaurant brand looking to open a new location in Manhattan. You have two options you’re evaluating: one site in SoHo, and another site in the Flatiron neighborhood. Which do you choose?

Keep Reading Show less
Enterprise

Arm’s new CEO is planning the IPO it sought to avoid last year

Arm CEO Rene Haas told Protocol that Arm will be fine as a standalone company, as it focuses on efficient computing and giving customers a more finished product than a basic chip core design.

Rene Haas is taking Arm on a fresh trajectory.

Photo: Arm

The new path for Arm is beginning to come into focus.

Weeks after Nvidia’s $40 bid to acquire Arm from SoftBank collapsed, the appointment of Rene Haas to replace longtime chief executive Simon Segars has set the business on a fresh trajectory. Haas appears determined to shake up the company, with plans to lay off as much as 15% of the staff ahead of plans to take the company public once again by the end of March next year.

Keep Reading Show less
Max A. Cherney

Max A. Cherney is a senior reporter at Protocol covering the semiconductor industry. He has worked for Barron's magazine as a Technology Reporter, and its sister site MarketWatch. He is based in San Francisco.

Policy

The great onshoring: Inside the transcontinental chip race

The second annual Trade and Technology Council emphasized the centrality of semiconductor onshoring to U.S.-EU military objectives.

For chip manufacturers, free-flowing subsidies for now might come at the cost of a potential overcapacity problem in the longer term.

Illustration: Christopher T. Fong/Protocol

The prospect of global conflict permeated the room at this year’s Trade and Technology Council, which concluded in France earlier this week. The second annual gathering of U.S. and EU officials yielded a joint statement that mentioned some form of “Russia” or “Ukraine” more frequently than “technology,” “regulation,” “investment,” “security” or “competition.”

The conflict in Ukraine, having already escalated into a U.S. proxy war, seemingly convinced the EU to fall in line with the American tech policy agenda.

Keep Reading Show less
Hirsh Chitkara

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He's based in New York and can be reached at hchitkara@protocol.com.

Climate

2- and 3-wheelers dominate oil displacement by EVs

Increasingly widespread EV adoption is starting to displace the use of oil, but there's still a lot of work to do.

More electric mopeds on the road could be an oil demand game-changer.

Photo: Humphrey Muleba/Unsplash

Electric vehicles are starting to make a serious dent in oil use.

Last year, EVs displaced roughly 1.5 million barrels per day, according to a new analysis from BloombergNEF. That is more than double the share EVs displaced in 2015. The majority of the displacement is coming from an unlikely source.

Keep Reading Show less
Lisa Martine Jenkins

Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).

Latest Stories
Bulletins