Civil War Gen. Philip Sheridan famously said, “If I owned Texas and Hell, I would rent out Texas and live in Hell.”
The situation has obviously changed.
Not only is Dallas a major corporate center and Houston, the nation’s fourth most populous city, the capital of the oil industry, but Austin is a rising tech star.
Austin’s ascendency was emphasized recently when software powerhouse Oracle said it would move its headquarters there from Silicon Valley.
In truth, the reality is more nuanced and the threat to Silicon Valley minimal. The same can be said for Seattle.
After losing Boeing’s headquarters to Chicago in 2001, Seattle went on a nearly unprecedented boom, especially in the 2010s. But unpacking what’s driving Austin’s popularity and the implications for Seattle’s status as a major tech capital is still rewarding.
Oracle’s roots in Silicon Valley go back to the early years of the transformation of the agricultural “Valley of Heart’s Delight” to its present name. The company was founded in 1977 as Software Development Laboratories.
In Texas this month, the boosters immediately went to work. The local newspaper trumpeted an economist calling Oracle “a huge development for Austin’s future. It follows the recruitment of Apple and Tesla and other companies that are really going to guarantee Austin a decade of significant growth, the likes of which we’ve never seen before.”
Texas Gov. Greg Abbott predictably said, “While some states are driving away businesses with high taxes and heavy-handed regulations, we continue to see a tidal wave of companies like Oracle moving to Texas thanks to our friendly business climate, low taxes, and the best workforce in the nation.”
Hewlett-Packard Enterprise Co. recently announced a move of its headquarters to Houston as well. And Elon Musk, a longtime critic of California, moved to Texas. So have 687,000 other Californians over the past decade.
Austin has evolved over the decades from a sleepy capital city (albeit with a capitol dome, Texans will remind you, that rises higher than the one in Washington, D.C.).
It boasts a leading music scene with the South by Southwest festival, decent Tex-Mex cuisine and the flagship campus of the University of Texas. Austin is more progressive, edgier and tolerant than most of the Lone Star State.
Put it all together and Austin was well positioned to develop as a tech hub. Oracle already has a campus there. You’ll find similar outposts of Big Tech, including Apple, which announced in 2019 plans to build a $1 billion campus there. That site is prepared to handle 5,000 employees initially with capacity to grow for 15,000. Apple already has about 7,000 employees in Austin. Amazon, too, has an Austin software development office.
Lower housing costs are undeniable — one result of a generally flat topography and minimal land-use protections that make it amenable to sprawl.
But Austin also has downsides. Traffic is miserable and it’s surprisingly behind on mass transit (only this year approving a light-rail system, while Dallas boasts the longest in the nation). Oracle’s campus is entirely car-dependent (the nearest bus stop is several blocks away).
The weather is blazing hot in the summer. Austin lacks the high-end cultural amenities paid for with oil money in Dallas and Houston. State law blocks localities from requiring low-income units in apartment buildings, a plus for developers but not for the poor.
Texas also struggles with inadequately funded schools (especially in poor districts), high poverty rates and outsized environmental problems (the state leads the nation in greenhouse gas emissions). Human-caused climate change promises severe hurricanes, rising sea levels and hotter temperatures (Gen. Sheridan might have been prophetic).
Those Californians moving to Texas need qualifying, too. California grew by nearly 2.3 million from 2010 to 2019, although it began to see a net loss in recent years. Most leaving aren’t the top-talent millennials that flock to the West Coast. Instead, most are less educated, lower-skilled workers with children.
Austin is at least a generation behind Seattle as a high-end technology hub. Both Microsoft in Redmond and Seattle’s Amazon headquarters are beyond anything Austin — or almost any other city — enjoys. The Texas capital lacks Seattle’s remarkable economic diversity, too.
And remember, other big-name tech outposts grew here because Seattle offered lower costs compared with the Bay Area/Silicon Valley while offering the amenities that tech talent desires.
Silicon Valley, with its cluster of world-class research universities, major headquarters, venture-capital abundance, serial entrepreneurs and startups isn’t anywhere near being dethroned. It can’t even be cloned. As Oracle announced its move, Bay Area companies Airbnb and Doordash went public with towering valuations.
Some are counting on the pandemic to scramble everything, especially if remote work persists. It’s unclear how many Oracle headquarters employees will move to Austin. Co-founder and Executive Chairman Larry Ellison has decamped for Hawaii.
So, what does it really mean to have that “friendly business climate”?
Considering that all the cities with high-quality economies are blue, the answer can’t be low taxes, “light regulation” and right-libertarian politics. If low taxes and little regulation were the ticket then Mississippi — or Somalia — would be economic powerhouses.
Instead, the answer is more complex. Clustering of talent and companies, great universities, high levels of education, livability, urban “cool,” nearby natural beauty, transportation options, an environmental ethic and tolerance are common denominators of the winner cities. History plays a big role, too — it takes generations to build these dynamos.
No wonder you’ll find outposts of Big Tech in all so-called Superstar Cities. There’s room at the top.
Austin is certainly a rival to Seattle — I’ve been writing for years that every other city wants the great assets we take for granted. But so are Boston, San Diego, Denver, Portland and many others. Given the actively anti-business extremism on the Seattle City Council, the city’s most dangerous competitor right now is Bellevue.
It may take a few Oracle-like relocations and perhaps worse to administer the two-by-four to Seattle’s head for an attitude adjustment.