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Why tech picked Texas

Austin

Good morning! This Wednesday, Margaret O'Mara explains tech's love for Austin, the Bay Area grapples with what's left behind, even venture capital is starting to move and Pete Buttigieg is getting a big new job.

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The Big Story

Why everyone's moving to Austin

Anna Kramer writes: Everyone in tech seems to be moving to Austin. It's become so much of a trend that a lot of people in my inbox have just accepted that Austin will be the next Silicon Valley. But … why? Austin's not some podunk town with cheap real estate, it's a bustling city that a lot of residents would say is already too crowded and expensive.

What about Austin actually makes it special enough that it could compete with the tech capital of the world? Margaret O'Mara has some answers. She's an academic who studies the history of Silicon Valley, and came onto the Source Code podcast to talk about what we can learn from that history. She gave us the best explanation of Austin's appeal we've heard yet.

  • First, this is not a new story. Austin is already three or four decades into the life cycle of a tech capital. UT-Austin plays a generative talent role similar to Stanford's for Silicon Valley, and long-entrenched tech companies like Dell provide the capital and jobs that the last generation of tech companies did for Silicon Valley, albeit on a smaller scale.
  • It's (relatively) cheap. Silicon Valley originally thrived because of cheap real estate and room to grow. While space for factories and office parks is less important now, Bay Area housing costs alone are untenable for most tech workers. Austin is getting very expensive very fast, but it can't hold a candle to the prices in Silicon Valley or San Francisco. The city also has room to build, and build fast.
  • No income tax will always be attractive for companies, because they can pay their employees less when they don't have to compensate for a tax like California's. (See also: Washington, which has been able to keep Microsoft and Amazon in the Seattle area.)
  • And Austin is just more fun. These days, many young people in tech don't want to live in a 21st century suburban version of Mad Men. (Or spend hours commuting to one.) They want a diverse city with nightlife and music and food, and they want to be able to afford all of those things without blowing all of their outsized salaries.

Put that all together, and "big, second-tier places like Austin are going to be thriving, particularly in this new era when geography is becoming much more flexible," O'Mara told us.

Are you moving? Are you thinking about moving? Tell us where and why! Reply to this email, or send a note to david@protocol.com.

More Moving

What the Bay's giving away

More from Anna: Tech workers leaving the Bay Area will cause an eventual decline in tax revenue for local governments and for the state. While we can't know for sure how much of a dent that will put on budgets in the long-term — it's hard to know who will move back and who will stay away — even the early data is eyebrow-raising.

San Francisco is expecting to collect at least $98 million less in business taxes than planned for this fiscal year, according to a November budget report, a large part of which is because many local workers were remote. And that's just the beginning.

  • The city can't tax businesses for workers that aren't physically doing their work in the city, so remote work translates directly to lost money. "If the level of telecommuting returned to its pre-COVID levels at the beginning of FY 2020-21," the city controller wrote in the report, "our projections for business [tax income] would be about $190 million higher than our current projections."
  • There are some indications that San Francisco may be harder hit than the surrounding counties, but this is an area to watch closely. If the trickle of companies and execs announcing their departure turns into a flood, it's easy to imagine there could be big tax consequences beyond SF.
  • It's not just SF, by the way: Reuters reported that 70,000 people left New York this year, resulting in about $34 billion of lost income.

The total budget shortfall could be much worse. When the SF controller's office releases its next set of projections, it will for the first time assume some level of permanent work-from-home, Michelle Allersma, the director of the budget and analysis division, told me. Even a small portion of relocated workers or permanent work-from-homers likely means the city's coffers will be missing millions of dollars.

Even More Moving

Where the money goes

No group of people has more control over the heat-center of the tech industry than the venture capitalists. Founders will always go where the financiers are, right? And the financiers have been some of the hardest to remove from Silicon Valley. But even that's starting to shift.

Fewer deals will be signed in the Bay Area, Pitchbook predicted. It believes the area will account for less than 20% of all VC deals next year by number, which would be the lowest proportion ever.

  • The "only invest locally" mindset has been shifting for years, but the trend of looking further afield has massively accelerated in 2020. "We are not bearish on San Francisco's long-term position as the center of VC," Pitchbook analysts wrote.
  • Helping that shift is "the rising comfort of VCs and founders working closely with each other over video and not traveling to work with each other in person," Fred Wilson wrote.

As for where VC themselves are going? Brad Feld picked three states: Florida, Texas and Washington. (Sound familiar?) "The more adventurous will move to Alaska, Nevada, South Dakota and Wyoming," he said. What do they all have in common? No state income tax.

A MESSAGE FROM SALESFORCE

Salesforce

Salesforce, the global leader in CRM, and Gavi, the Vaccine Alliance, announced today that they will collaborate to help Gavi manage critical information to equitably distribute approximately two billion COVID-19 vaccines to 190 countries by the end of 2021. Fair, rapid and equitable access to vaccines is critical to ending the global pandemic.

Learn more about this collaboration

People Are Talking

Airbnb is staying put, Brian Chesky said:

  • "When I came to San Francisco, I was taken by the unique culture — people believed almost anything was possible, and they were willing to believe in a 26 year old and his two friends with a crazy idea to let strangers live together. I don't think I would have succeeded in the same way if not for the people I met here."

So you think Zoox's car looks a little silly? Fine by Zoox CTO Jesse Levinson:

  • "Honestly, if you're trying to move people around cities, it makes much more sense to have the kind of compact carriage … We were never actually building a sports car."

MacKenzie Scott has developed a playbook for giving away billions in record time:

  • "[The team] took a data-driven approach to identifying organizations with strong leadership teams and results, with special attention to those operating in communities facing high projected food insecurity, high measures of racial inequity, high local poverty rates, and low access to philanthropic capital."

The Periscope team offered a surprisingly honest answer for why the app is shutting down:

  • "Over the past couple of years, we've seen declining usage and know that the cost to support the app will only continue to go up over time. Leaving it in its current state isn't doing right by the current and former Periscope community or by Twitter."

You know who's excited about Signal's new encrypted group video calls? Ed Snowden:

  • "I have been waiting for this for a very long time."

Making Moves

Pete Buttigieg will be Joe Biden's Transportation secretary. He's an outspoken proponent of AB 5 in California, and will have a key role in determining the country's self-driving policies going forward.

Liang Mong-Song is reportedly resigning from SMIC. He was co-CEO, alongside Haijun Zhao, and reportedly quit because the company hired former TSMC VP Chiang Shang-Yi without telling Liang.

Airtable overhauled its executive team. Peter Deng is the company's new chief product officer, joining from Uber. Ambereen Toubassy is its new CFO after a stint at Quibi(!) and Seth Shaw is the new chief revenue officer after running sales at Invision.

Twitter picked AWS as its strategic partner for delivering users' timelines. Who doesn't love a sexy cloud deal?

Wish priced its IPO at $24 a share, at the top of its proposed range. Presumably this number will double or triple before its stock actually goes on sale.

In Other News

  • A new Google antitrust suit might come tomorrow, POLITICO reports. This one would focus on the search engine's design, which states are expected to argue disadvantages rivals.
  • Australia sued Facebook, saying it used Onavo to collect data without permission.
  • On Protocol: The EU proposed the most aggressive anti-tech legislation yet, with strict rules on content moderation and anticompetitive behavior. But it'll take a long time for the rules to become law, and tech's not going down without a fight.
  • Facebook escalated its IDFA fight with Apple. It's taken out full-page ads in The New York Times, Wall Street Journal and Washington Post today, claiming it's "standing up to Apple for small businesses everywhere."
  • On Protocol: Stanford professor Adrian Daub is confronting tech's billionaire philosophers. He thinks their big ideas are borrowed and repurposed.
  • Microsoft reportedly helped seize a domain central to the SolarWinds hack. Microsoft will also use Defender to forcibly block the affected Orion app. And Silver Lake and Thoma Bravo sold almost $300 million of SolarWind shares last week — just before its stock plunged 22%.
  • On Protocol: Facebook lifted its political ad ban for Georgia. Protocol previously reported that the ban had pushed millions of dollars in political advertising to dark platforms and far-right news outlets.
  • Facebook identified interference in African politics by people affiliated with the French military who used fake accounts. The French group battled Russian groups for online influence, Facebook said.

One More Thing

Dell's peanut blossom cookies

Our holiday recipe takeover continues! Want in on the action? Send yours to akramer@protocol.com, or just reply to this email.

Today, it's Dell's public policy director, John Howard: "For me, the holidays are usually all about sweets, thanks to my family's baking skills. Each Christmas, we'd help my mom bake thousands of amazing Christmas cookies of all sorts and hand deliver them to our friends and neighbors. My most treasured Christmas cookies are peanut blossom cookies, thanks to that delicious combination of peanut butter and chocolate. This recipe makes about three dozen cookies. Hope you enjoy and that this recipe inspires you to start similar traditions with your family this holiday season!"

You can find Howard's peanut butter and chocolate cookie recipe right here, if you'd like to try them yourself.

A MESSAGE FROM SALESFORCE

Salesforce

Read more about Salesforce's collaboration with Gavi, the Vaccine Alliance to use Salesforce technology to manage critical information to equitably distribute approximately two billion COVID-19 vaccines to 190 countries by the end of 2021.

Learn more about this collaboration

Today's Source Code was written by David Pierce, with help from Anna Kramer and Shakeel Hashim. Thoughts, questions, tips? Send them to david@protocol.com, or our tips line, tips@protocol.com. Enjoy your day; see you tomorrow.

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