Is Texas Becoming The New California? - YouTube

Texas, in many respects, stands alone.

It's huge. It's iconic.

Its people are proud.

And lately a growing number of businesses and billionaires have decided they'd rather be a part of the Lone Star State than, say, California.

This has turned into an absolute tidal wave.

They are looking for a state that gives them the independence, the autonomy and the freedom to chart their own course.

Texas is big, wide open spaces.

There's room to grow and it's got a very business friendly environment that makes businesses willing to move here, too.

Austin is where Tesla is building its giant new gigafactory, Oracle moved its headquarters and Apple's building its second largest campus.

Governor Abbott talked to TikTok about a possible U.S.

headquarters there, too.

CBRE and Charles Schwab both relocated their headquarters from California to the Dallas area in recent months.

And Hewlett Packard Enterprise is headed to Houston.

The pandemic in particular has had a really interesting effect, right?

If you can work from anywhere, you can still be employed in San Francisco,but living in north Texas.

Our real estate costs are a third of what you get in the Bay Area.

Of course, it all depends on having electricity to keep the web, you know, going, especially if you're going to be telecommuting.

But long before its power grid was decimated by February's historic winter storm, Texas was experiencing a major boom.

The state's economic development agency says there's been a tremendous increase in corporate relocations since the pandemic hit, with nearly 200

projects in the works at the end of 2020.

I think a lot of businesses see that and say, you know what, I can run my business without this massive government interference that I get from

running my business in places like California or New York.

Texas and California are the two most populous states with a fifth of the nation's people between them.

As the largest Democratic state and largest Republican state, the rivalry between them is no surprise.

While California's population and job growth both slowed to a trickle, Texas added more residents than any other state in 2020.

With no income tax, Texas has attracted wealthy individuals like Joe Rogan, Elon Musk, Drew Houston and Joe Lonsdale to make the move.

One of the reasons I moved here is it feels like being extra American in a way.

You know, it's like extra pull yourself up by your own bootstraps.

As the ninth largest economy in the world, Texas has always been a major business hub.

In CNBC's rankings of top states for business, Texas came in second.

Dallas has long been the financial capital of the giant state.

Incredible amounts of people are moving to Dallas right now.

We picked up Toyota, State Farm.

I can't even name all the companies.

Manufacturing is huge in central Texas.

Houston is home to big oil and energy, where major names like Exxon and Shell have been since the early 1900s.

Largely thanks to oil and natural gas, Texas has been the country's top exporter for 18 consecutive years.

The state's Economic Development Corporation says Texas is home to 50 Fortune 500 headquarters, more than 1,600 foreign-owned companies and 2.7

million small businesses.

Its civilian workforce of 14 million is second only to California's 18.7 million.

Texas has world class educational institutions: the University of Texas system, UT Austin, the Texas A&M system, Houston,

Dallas, and that's part of what makes it so attractive to so many of the companies coming here.

And as the pandemic created a work-from-anywhere mentality, data from the U.S.

Postal Service shows that Texas was the second most popular destination for people leaving the Bay Area.

The cost of living here is normal.

It's not artificially inflated.

So you can actually come out here and actually make a decent living without having to spend four thousand dollars a month living in

a studio apartment with rats.

And although California is top of mind when it comes to big tech, Texas has a rich history of tech business, too.

Texas Instruments pioneered the development of silicon transistors out of Dallas in the 50s.

In the 80s, three engineers from Texas Instruments broke off to form Compaq, developing the first portable laptop-sized computers out of

Houston. Dell was founded by a freshman at University of Texas at Austin in 1984.

IBM has had a major presence in Austin since the 60s, while Microsoft is a major employer in the Dallas area.

You think about Californians, it's the forty-niner, right?

The 1849er who came to California to strike it rich and the Gold Rush and the birth of Levi jeans and everything like that.

So in the northern part of California, you've got tech companies and so it's moved from gold to silicon.

Whereas Texas is a different story.

Texas is Texas, right?

It's the Caddo word and it means traveler or friend.

And in Texas, we celebrate the Six Flags of Texas.

And so the idea of Texas, I think is very different.

It's about coming together.

It's about bringing different things to the conversation, throwing your stuff into the mix and seeing what emerges from that.

With a big new presence from Apple, Tesla and Oracle, some are asking if Austin will be the next Silicon Valley.

We want to learn from Silicon Valley.

We want to take, you know, copy some of the great things from Silicon Valley.

We love great people moving here from Silicon Valley, but we don't want to be Silicon Valley.

People really love being in Austin.

That has forced and propelled tech companies, large ones, to establish offices here.

Austin is also home to South by Southwest, which Goswami has been involved with since its early days as a tech festival.

He graduated from Stanford and moved to Austin in 1995 to work for tech company Trilogy, which also relocated from Silicon Valley.

We want people to become part of Austin.

We want them to come and leave some of the California baggage in California.

Some say a major difference for companies starting in Texas instead of California is in funding models.

What happens in Austin is a lot of bootstrapping.

And then, oh, you've got something.

Let's go add some funding to it, but you've got something that's proving itself out.

Right? Whereas in California, they'll go fund something with just an idea.

We have some VCs here.

We have some funds here. Is it competing with Silicon Valley?

No, not even close.

While California had $65.6 billion in VC investment in 2019, by far the highest of any state, Texas came in fifth at

$3.7 billion. While there's some investors that would only invest in Silicon Valley, there are only more and more investors who are willing to

go do it other places.

Investors like Josh Baer say funding a startup in Austin has gotten much easier.

I've been here more than more than 20 years.

It's the best it's ever been.

This huge influx of all these people, capital, ideas, and that's just making it all happen faster and easier.

And so I think that Covid-19 really pushed everyone over the edge.

I put together a deck on Friday and by Tuesday we had the round done.

$5 million and that was all in Texas.

That would not have been possible seven years ago.

Last year, Lloyd Armbrust launched a PPE manufacturing company in an Austin suburb called Pflugerville.

It produces up to 1.2 million masks per day.

I wouldn't have done it in California.

There's just no way. The regulations border on the ridiculous.

The Pflugerville Economic Development Group offered him more than a thousand dollars for each job he brought to the area.

Austin offers similar incentives, like big property tax rebates at Samsung's proposed new chip factory.

Armbrust first moved to Austin in 2011, relocating an earlier company he started from the Bay Area.

Hiring was the number one reason that we came here in 2011.

There was just access to really smart people and there wasn't that competition.

You get into Facebook, but then Uber is coming at you and saying like, Oh, I'm going to give you $100,000 more and stock.

And it's very, very hard to compete with that.

More than 200 companies have relocated to Austin since 2017 and more than 70 of them came from California.

SpaceX is expanding in south Texas, where it already has a launch site.

But Elon Musk is growing his presence in Austin, too.

He moved his personal home from LA to Austin.

Tesla's cybertruck will be built at the new Gigafactory in Austin.

And The Boring Company is opening a big space next door to Armbrust.

Probably the funniest reason that I don't think a lot of people are realizing is because across the street is the private airport.

When, you know, someone's looking at Texas, they're saying, how can I get around?

And I think having access to that private airport is actually a really big deal.

Getting around the huge sprawl of Texas, especially as more people move in, means traffic is a problem.

So you know how horrible I-35 is, it's a a dumpster fire.

A toll road with the country's highest speed limit, 85 mph, offers one alternative to the infamous traffic on Austin's I-35.

And there's a $20 billion high-speed rail project in the final planning stages.

It would go the 200-plus miles from Dallas to Houston in 90 minutes.

You can drive for 12 hours and you're still in Texas.

Like, it's a big state. At 1.6 times the size of California, Texas is the second largest state after Alaska, and all that land is a big

draw for manufacturing sites.

There's plenty of room, like there are just farmers' fields waiting to be developed everywhere around me.

Of course that translates into cheaper rents and cheaper rates.

We wouldn't be able to be successful in California with this business.

Unit economics wouldn't make sense.

And all this space leaves room for a lot of cultural variety beyond the Texas cowboy stereotype.

It's not like hey, come to Texas and you have to wear cowboy boots and you have to have a cowboy hat and engage in everything super Texan.

That's not the case. My neighbor was white.

My other neighbor was Vietnamese.

Neighbor after that was Indian and neighbor after that was black and Spanish and so forth and so on.

So there's a diversity here that I think is hard to top in a way that a lot of people don't really think Texas is.

Colion Noir grew up in Houston and now lives in Dallas.

He worked for the NRA from 2013 to 2019, but he didn't touch a gun until he was in his mid 20s.

In Texas, I'm left to enjoy my ability to exercise my right without any unnecessary restrictions in a

way that you can't say in a lot of other states.

A good 75 to 80% of the guns that I own now in Texas, I wouldn't be able to in California.

Whether it's individual rights or business friendly regulations, Texas government has a reputation for being hands off.

That, to me, is one of the biggest differences between Texas and California.

It's the fact that we understand, like we place a high premium on freedom and independence.

California handled the pandemic far more strictly than Texas.

Just one example of the states' differences in approaching regulation.

The government there is so oppressive that they shut down a mask manufacturing facility during Covid.

Elon Musk cited freedom from regulations as a reason for his move to Texas.

Last May, Musk openly defied state shutdown orders by reopening his plant in Fremont, California.

When the county pushed him to shut down again, he threatened to leave California altogether.

California has been winning for a long time, and I think they're taking it for granted, a little bit.

Fewer Covid-related regulations in Texas allowed businesses to stay open.

But Texas has a higher death rate than California.

Despite warnings from Biden officials, Governor Abbott lifted statewide mask requirements and business capacity limits on March 10th.

Austin didn't immediately follow suit.

Starting today, it's mask's off in Texas.

The city says it is keeping masks in place for now.

But then last night, the state's AG threatened to sue the city if the city and county didn't comply with the state's mandate lifts.

Texas political climate also comes with fewer taxes.

This is a personal income tax form in California.

I never want to see one of these in the great state of Texas.

At 13.3%, California has the nation's top marginal income tax rate.

Texas is one of a handful of states with no income tax.

No matter which way you measure it, it is way cheaper to live your life and to run your business in Texas than California.

It's taxes.

It's cost of doing business.

It's overhead. It's labor.

The Tax Foundation ranked Texas as the 11th best state for business in its 2021 State Business Tax Climate Index.

California came in 49th.

The Texas cost of living is also far lower.

I'm priced out of California and people would consider me pretty wealthy, I'm sure.

Like, I can't go to California and move my family there.

I couldn't afford it. After living in San Diego for about seven years, we were hoping to have kind of a larger family and move into a bigger house,

which in California is very difficult, right, if you want a place with good schools.

Brant Alder moved to Austin from San Diego in 2015.

While Texas property taxes are some of the highest in the nation, Alder still preferred the tax system in Texas.

We went from about 1.25% property tax to 1.7% and then got rid of the income tax.

So for us on the tax side, it was definitely a net gain moving to Texas.

If you move to Texas, they charge the same property tax to everyone.

But in California, there can be this huge disparity, which I think is kind of an undue and in my opinion, unconscionable, burden placed on younger

people and newcomers.

But Alder was surprised at the high cost of utilities in Texas.

Take his water bill, for example.

It was like $12,000, just a connection fee.

And then on top of that, you know, I think our overall bill was like, I can't remember, $200-$250.

And that was just for inside our house.

Alder moved his family back to California in 2016.

You guys ready to say bye to Texas?

Bye Texas! Now they're getting ready to move to Nevada.

My dream is to be able to see California from my front porch, but not necessarily pay the high taxes or the high housing costs.

While housing is still far cheaper in Texas than California, the population boom is taking the Texas housing market with it.

Austin home sales in January, for instance, were up nearly 24% and inventory was at a record low.

Frisco, Texas, topped the Census Bureau's list as the fastest-growing large city in the country.

Texas cities took six of the top 15 spots, while Irvine was the only California city that made the list.

More than 43% of Frisco homeowners have lived in the same home for less than 10 years.

The market right now is just insane.

I mean, I'm looking at places and they're being snapped up in two weeks.

They're coming in and they're pushing out people who have lived there for generations.

In fact, it could happen at a greater rate because the way that the property tax system works, it kind of has almost like gentrification built

into it. Property taxes in Texas rise with the value of the home, so housing demand raises taxes for current homeowners.

Is that sort of like auto-gentrification that's built into the Texas real estate model, is that a good thing?

I think, ultimately, yes.

And the reason why is because it generates wealth for everyone.

The businesses that are coming in here are paying a lot more than the minimum wage.

And I think that's just going to lift everybody up.

I know everyone keeps talking Austin is like the California of the South.

No, it's not.

It's still Texas. It's nasty.

It gets hot.

It gets slimy.

It's muggy. We can't talk about Texas without mentioning heat and humidity.

It's hot for three months straight and there's no expected reprieve.

Texas heat has led to terrible droughts and wildfires in the state, just like in California.

And while California has earthquakes, Texas has hurricanes.

The deadliest natural disaster in U.S.

history was a sudden hurricane in 1900 that hit Galveston, killing more than 8,000 people.

In 2017, Hurricane Harvey took at least 68 lives and flooded more than 300,000 structures, causing $125 billion in

damage. And in February, an unprecedented winter storm killed at least 80 people and left 4.4 million residents without power and more than seven

million without clean water for days.

The Republicans have been in charge for a very long time here.

They believe in small government.

They believe in less regulation.

And it's all good until the entire state goes in the dark and you get $50 billionin

lost property and insurance losses for businesses.

While the rest of the country draws power from two national grids, Texas is the one state that's disconnected, largely to avoid federal regulation.

Some blame this independence for the failure.

We're stranded in terms of the operation of our grid, by and large.

The reason that the grid failed is because we have huge and peaking demand, thanks in part not only to the storm, but also because our

population has swelled so much and really our infrastructure has not kept up with it.

By early March, huge power companies started filing for bankruptcy after Texas'free-market power grid system led to bills in the billions.

When a company is looking at its critical infrastructure checklist for considering a move, Texas is definitely going to fall down

on that metric.

And I think it's going to impact a lot of decisions here in the going forward future.

As fallout continues from February's storm, some Democrats say it could be the catalyst that turns Texas blue.

I think it's not a question of if, it's a question of when.

In Texas, all of our big cities are liberal, they vote Democrat.

A catchphrase has even emerged from those who prefer not to see political and cultural shifts in Texas.

So "Don't California my Texas" is essentially saying: if you're going to come to Texas, come to Texas.

Come one, come all. We welcome everyone.

However, you're leaving California for a reason.

Yeah, sure, you can come over here because you like the lower income tax or the lack thereof.

But at the same time, if you continue to vote for the people who, like the people in California, who were instituting these high income taxes, it's

going to follow suit. This next year, I think it's going to feel like the past 10 years compressed into one, from the announcements of new people

moving here and companies coming here and new things launching.

While the trend is indisputable, debate remains about whether it will, in fact, change Texas long-term.

Everything that Elon Musk is today is because of California.

Like, his first and second, third starups, PayPal, all of that was in California.

Yet instead of saying, hey, let's improve California and make California really a great place, he's like, I'm leaving.

So he brings a transactional mindset.

He doesn't bring a long term mindset to Texas.

Right? It's just the place for him for now.

There's an entrenched culture that needs to be respected in Texas because that's why Texas is the way that it is.

And why it is such a sought-after place to live now.

And so don't try to uproot it.

Just add a little spice.

Bring a little bit of what culture you brought from California.

Just kind of sprinkle it a little bit there and then leave Texas as it is and enjoy it.

Try to appreciate what Texas is and just embrace the freedom.