No, Austin Won’t Become Silicon Valley 2.0

Attracting so many tech companies and workers from California isn’t going to transform the city into another San Francisco—for both the better and worse.

Photo Illustration by Texas Monthly; Austin: Allan Baxter/Getty; Fractal light: Getty

On the heels of last month’s remarkable migration of tech industry capital from California’s Bay Area to Austin, including an official relocation by $180 billion software company Oracle Corporation and a more-than-likely move by $140 billion man and Tesla CEO Elon Musk, two popular narratives have taken shape. Both got Austinites of all sorts worked up, whether jolly or jittery, over the holiday season. The two stories, however, share the same flaw: a facile comparison of two sharply different contexts and cities.

The first emerging narrative, favored by champions of Austin’s growth and fans of the state’s dominant low-tax, anti-regulatory economic philosophy, holds that California’s business environment has declined as a result of liberal mismanagement and intellectual conformism. Texas is swooping in to offer a new home for the global technology industry for the coming decades—a back-to-its-libertarian-roots Silicon Valley 2.0 with a bright future. A partial version of this argument was made by recent California-to-Austin transplant Joe Lonsdale of venture capital firm 8VC in the Wall Street Journal: “Our job as entrepreneurs and investors is to build the future, and I know of no better place to do so than Texas.”

The other tale, told by those appalled by the sky-high rents and wealth inequality of today’s San Francisco region, is that the tech industry itself is the real villain, having eaten the Bay Area alive and now in the process of spitting out the bones of a once-dynamic city. The same rapacious billionaires are moving on to fresh prey in still-groovy Central Texas, which is destined to turn into another smoking cultural wasteland, this story goes. As an op-ed by a California writer in the Houston Chronicle put it, “Thank you, Texas, for taking Elon Musk off our hands.”

Both stories have their truthful elements, but both fail to credit the vast differences between Austin and the Bay Area: in history, in industrial and social capital, in physical landscape, and in cultural horizons. There’s no question that the pandemic-era “Texodus” from the Bay Area is big news and that Austin’s post-Oracle trajectory should make residents excited—or worried, depending on one’s level of economic security and nostalgia for the city’s laid-back, low-rent mystique. But it’s lazy, chimerical thinking to graft global giant Silicon Valley’s recent history onto upstart Austin’s near future. Austin has its own unique story as a tech-industry town, and crucial chapters remain to be written.

For years, the Austin metro region has been trying to earn the self-anointed moniker “Silicon Hills,” with varying degrees of success. Like Silicon Valley’s Hewlett-Packard garage, the 1939 spiritual birthplace of the U.S. tech industry, Austin’s tech sector has a mythical origin point in Michael Dell’s UT dorm room circa 1984. There are other similarities too, in the role of large universities as incubators and in the cross-pollination between entrepreneurs and the counterculture. But the history of Austin’s tech sector is neither as long nor as storied as that of the Bay Area.

A 1990s upswelling of Dellionaires in Austin gave way to a burst dot-com bubble in the 2000s, with the concrete hulk of the Intel Shell reminding downtown visitors what dreams had failed to come. Meanwhile, mega-firms such as Google, Facebook, and Apple roared out of Silicon Valley to define a new, twenty-first century age of billionaire industrial barons starting in the second Bush administration. Austin was stuck in the relative bush leagues, with Dell hitting a rough patch.

Austin’s current place on the tech-world map has lately been defined by its many secondary campuses for major tech companies—most significantly Apple, IBM, and Samsung—employing tens of thousands of people in the region. This trend has heated up in recent years, with more and more investment from outside firms, until one such secondary campus, Oracle’s, was rechristened last month as a Fortune 500 corporate headquarters.

There’s no question that the Oracle move is huge for Austin. Still, it’s worth keeping in perspective what it means, both for the company and for its new home city. Oracle’s revenues are on the decline. With no state income tax, salaries go notably further in Texas, creating an opportunity to cut payroll without cutting employees’ take-home pay. The move is especially easy to make now, as a work-from-home “new normal” means there’s no need for Oracle to force all its deeper-rooted California employees to make the move. Indeed, Oracle announced its relocation alongside a shift to a “more flexible employee work location policy.” The company seems to want to have its Texas cake and eat it in California too.

Oracle isn’t choosing Austin because the city is poised to overtake the Bay Area as the capital of the U.S. tech industry anytime soon. In 2019, according to the Computing Technology Industry Association, the San Jose and San Francisco metro areas combined for over $333 billion in gross tech regional product in 2019. Austin managed just over $33 billion. That’s an order-of-magnitude difference.

Nor is Austin known for producing high-flying, home-grown tech firms. The city’s second most famous local tech company, after Dell, is now arguably SolarWinds, a business IT software company that reportedly outsourced its coding to Eastern European engineers and is now at the center of an embarrassing and catastrophic hack of U.S. government and corporate targets by the Russian government.

There’s a built-in-a-day flavor to Austin’s recent rise that, while a good starting place for future development, pales in comparison to the long record of success, relationships, and intertwined institutions in Silicon Valley. Decisions to move jobs here that depend on low tax rates or the preferences of young college graduates are fragile. Those same jobs could just as easily get up and leave Texas if another state undercuts us or another city seems hipper to Zoomers.

Furthermore, to the extent that more liberal white-collar workers move to Texas, the political tides may well continue to shift to the point where we are no longer willing to race other states to the bottom in terms of taxes and regulations. A balance will perhaps be reached in which Austin, like other prosperous cities, has a positive, reciprocal relationship with its biggest employers but is no longer enough of a magnet to ignite the idea of attracting an entire industry away from California. Likewise, losing a few businesses and billionaires may ultimately be good news for the Bay Area, allowing it some elbow room after a decade of uninterrupted growth.

In addition to building electric cars, Musk’s abiding passion these days is sending rockets to Mars to build a human settlement there. It’s useful to imagine his move to Austin in that context. A recent Guardian article on the Oracle move characterized Austin as a “colony” of Silicon Valley and quoted urban theorist Richard Florida: “There is a satellite system that’s developing, but the hub of technology and innovation in the United States is the San Francisco Bay Area.”

So if we think of Austin as less a tech-industry hub unto itself and more a colony for Bay Area billionaires, what does it mean for the Live Music Capital, the City of the Violet Crown? As the industry grows, will the music die, the slackers be forced to abandon their velvet rut, and the violet at dusk fade into a cloud of auto exhaust? Some of these things may already be coming to pass without Oracle’s help, but these outcomes aren’t inevitable. The San Francisco metro area’s experience is a valuable lesson from which to learn, not a destiny to succumb to.

Yes, the Bay Area boasts the highest real estate costs in the U.S., with a years-long eviction crisis in San Francisco likely tied to tech-related gentrification. It is vital that Austin voters and policy makers bone up on these issues before they grow worse in what is already arguably the most expensive city in Texas. Median rent for a one-bedroom unit topped $2,000 per month in Oakland and San Jose, and $2,700 in San Francisco, this month, though rents are reportedly falling fast as a result of COVID-19 and perhaps the “Texodus.” In comparison, Austin’s median one-bedroom rent is $1,290 and rising, occupying a dangerous zone that feels high to Texans but is still low enough to appeal mightily to priced-out Californians.

Affordability-wise, however, Austin’s broad horizons give it options not available to San Francisco. For example, there’s still plenty of room to sprawl. Austin is surrounded by cheap land that one can easily imagine filling with suburbs and exurbs as Greater Houston and Dallas–Fort Worth have. The Bay Area, on the other hand, is penned in by mountains and water.

Beyond resorting to sprawl, Austin also has the option to avoid repeating some of the worst planning decisions made in San Francisco and Silicon Valley, many related to restrictive zoning. The woes of Bay Area renters have led to a robust Yes in My Back Yard (YIMBY) movement, pushing back against homeowners who exercise outsized political power to prevent new and affordable housing in their neighborhoods. This YIMBY ethos has already come to Austin. In recent years, Austin voters have passed a $250 million bond for affordable housing and delivered a city council majority that favors increased housing density, though anti-density forces have been effective in dragging out the process of a comprehensive rewrite of city zoning.

Here’s hoping Austin’s majority political will prevails and affordability in the housing market is aggressively managed, because it is unaffordability—not a strong local economy per se—that endangers a lively arts and culture scene. A market where only 32 percent of creatives—down from 42 percent in 2019, according to the City of Austin—can afford enough space to make their art is a problem. An influx of new money that endows mature arts institutions like museums and professional performing arts ensembles, on the other hand, would be a good thing. If that’s turning into San Francisco, Austinites should embrace it.

It’s difficult to prove the prevalent notion that tech nerds have pushed out all the cool people who made the Bay Area’s music scene interesting, but let’s take as a given that this is true. If so, the Bay Area would be an outlier. Other metros defined by tech, including Austin and Seattle—which as home to Microsoft and Amazon has a much stronger claim to being Silicon Valley 2.0 than Austin does—are often recognized for their strong music scenes. Even today, as Seattle rents soar thanks to Amazon, the region is the origin of three acts in Pitchfork.com’s top twenty albums of 2020. Other expensive cities, like Los Angeles and New York, have thriving music cultures. Here in Austin, Spoon, arguably our biggest musical export of the 2000s, was cofounded by semiconductor chip designer and erstwhile Motorola employee Jim Eno, who has also produced albums for local acts like Bill Callahan and Explosions in the Sky. Being a job magnet for young, employable people is by no means a recipe for a moribund music scene. In fact, the opposite is often true.

Of course, it’s not just artists and musicians at risk of displacement when rents go up or newcomers arrive. The themes of recent arthouse film The Last Black Man in San Francisco will be all too familiar for many Austin-born people of color, who have seen their neighborhoods of origin gentrified beyond recognition during the past decade’s tech boom. An influx of Silicon Valley transplants might bring a more globally diverse perspective to Austin’s professional classes, but it will also put further pressure on local Black and Hispanic families who have suffered generations of exclusion. This seems, unfortunately, like an arena in which Austin is on track to parallel some of the Bay Area’s recent inglorious history. Both Austin and San Francisco, for instance, have lost Black population this millennium—though, to be fair, Austin’s trend was established long before Oracle or Musk.

The bright spot for Austin is that, again, the city still has time to make better and more equitable decisions. Is it possible to manage drastic changes in the cityscape in a way that actually serves poor and minority stakeholders? Where did San Francisco go wrong, and where can Austin do better? Signs of changes in Austin city politics, like the pro-density majority on the city council, the affordable housing bond, and November’s long-awaited passage of a $7 billion transit ballot proposition that includes urban rail, suggest that the citizenry is engaged with these questions.

If there’s one reason to be confident that Austin will not turn into the next Bay Area, it’s this: Austinites of all political types, from libertarian to social-justice-minded, have been warning each other for years that we don’t want to turn into the next San Francisco. How the political fights of the future will go —not to mention tomorrow’s economy—is anybody’s guess. But there’s no chance we are sleepwalking through a reenactment of the past few decades of California history. For better or worse, what gets built here will be something brand-new.

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