Free competition in the United States for investment, businesses, and jobs is being won, and by a landslide, by Republican-governed states. And Texas has taken one of the jewels of the crown: Tesla co-founder and CEO and SpaceX CEO Elon Musk has left Silicon Valley to move to Texas.
According to Musk’s own words, the move was for two priority reasons, which are related to his companies: the new SpaceX space vehicle being built in Texas, and Tesla Inc.’s Gigafactory, which is under construction in Austin, Texas.
“The two biggest things I got going on right now are the Starship development in South Texas … and then the big new U.S. factory for Tesla,” Elon Musk told the Wall Street Journal. Living in California, “wasn’t necessarily a great use of my time here,” Musk said.
But, clearly, there are two other highlights of this move besides Musk’s projects: his dissatisfaction with high taxes and constant California regulations. In that sense, Republican states, like Texas and Florida, are capitalizing on the discontent of big companies and businesspeople with the Democratic administrations.
According to the WSJ: “Taking up residence in Texas comes with personal benefits for Mr. Musk: The state doesn’t collect state income or capital-gains tax for individuals. The auto executive qualified this year for billions of dollars in stock-option compensation as part of a pay-package agreement, making him the second-richest person in the world.”
Elon Musk, tough on California
Musk is currently the second richest person in the world, only behind magnate Jeff Bezos. According to the BBC, “last month, Mr. Musk’s net worth jumped from $7.2 billion to $128 billion after Tesla shares went up.”
For Musk to move and take Tesla all the way to Texas is a major blow to California. Just to get an idea, the company that makes electric cars is valued at about $500 billion. On the other hand, SpaceX -Elon Musk’s spaceflight company- already has facilities in Texas, so it is logical for the tycoon to move there himself.
Now, beyond the logic in the “escape” from Silicon Valley, it is interesting to analyze several of Elon Musk’s statements.
California is like a smug old team
Tesla’s boss made a simile where he exemplifies California as a once-successful sports team that is now worn out and not hungry for success: “When you’ve been winning too long you take things for granted. So, just like some pro sports team they win a championship you know a bunch of times in a row, they get complacent and they start losing,” he said. “California has been winning for a long time. And I think they’re taking it for granted a little bit,” he continued.
Musk’s words, while they may be described as a bit reductionist, are not without reason. California was the fifth-largest economy in the world recently, with everything in their favor to continue growing, but it has gradually lost weight and appeal. Its businesses and workers are leaving in search of better opportunities, and that’s a bad sign.
As Elon Musk argued, the great sports teams of history went through cycles and got worse. It happened to all of them at some point: the post-Jordan Bulls, Pep’s Barcelona, Low’s Germany or Zidane’s own Real Madrid are good examples.
The best years of these teams came with a strong collective gear, good managerial decisions, and great individual moments of their main figures, but at some point they lost that sacred fire.
But beyond the collective and individual wear and tear, many times, what actually happens is that the management of the leadership was populist, harmful, and disastrous. A clear example is the sports management of Josep María Bartomeu, former president of FC Barcelona, who destroyed any glimpse of the best times of Barcelona.
Something similar happens to California, mutatis mutandi. Populist policies, many of them socialist, have diminished the quality of life in the Golden State. The cost of living is quite high, crime has been on the rise, and basic services such as water and electricity are failing. Besides, there is a clear fiscal and state policy that, far from solving problems, is making them worse.
And this is simply unacceptable for the world’s fifth-largest economy. For they are not only harming big business, like Musk, but their entire citizenry.
California’s governor was shocked
After announcing his move, it is inevitable to look back and not recall Elon Musk’s problems with health authorities in California.
Back in May, the relationship between California and Musk soured. Local officials – health authorities – refused to allow Tesla to reopen its factory in Alameda County during the pandemic lockdown.
Elon Musk tweeted that Tesla had filed a lawsuit against the county and that the company would immediately move its headquarters and future programs to Texas and Nevada. “Frankly, this is the last straw,” said the tycoon.
At the time, California Governor Gavin Newsom downplayed the issue, noting that he was “not concerned about Elon leaving soon” because, according to the Governor, the state was committed to the success of automakers.
But there was another statement that does not look so good now: “We may not be the cheapest place to do business, but we are the best place to do business,” Mr. Newsom said, to ensure that companies will continue to invest in California and that they will not leave.
Musk’s move shocked not only Newsom, but all the California authorities who think companies will stay in California just because of the brand while it is not competitive enough in terms of taxes, economics, quality of life and freedom.
Just as Elon Musk is moving to Texas, the workers are also moving to the state. And that, in addition to being a Republican success, is a Democratic failure.