Will Silicon Valley Remain a Global Tech Hub?
We all know Silicon Valley is the epicenter of all things tech. However, could rising housing prices and taxes change that?
Oracle and HP have completely moved their headquarters to Texas. Tesla is planning to build a large factory near Austin. Palantir has made the move to Denver. While many other companies haven’t moved, they are starting to establish a presence outside California. Google, for instance, announced it was going to spend $50 million on office spaces in Texas this year. They currently have 500,000 square feet of office space in Austin and are planning to increase that by 750,000 square feet in 2023.
Why the Move
Housing prices are a big factor. Home ownership has become very difficult for tech workers where the average home costs nearly $1.4 million dollars. Add to that some of the highest income tax in the U.S. and it becomes clear why Silicon Valley residents are upset.
An increase in the cost of living doesn’t only have an impact on big companies looking for prospective engineers. Small startups are also affected by such a change. This could cause innovation to decrease in Silicon Valley and increase somewhere else.
Where Could the Next Silicon Valley be
While many companies are looking to move into Austin, it’s unlikely that it will become the next Silicon Valley. One reason is education. What made the valley so prosperous was its proximity to UC Berkeley and Stanford; both of which have outstanding engineering departments. While UT Austin has a great engineering school, it just doesn’t have the funding or talent that Stanford or Berkeley has. Stanford alone had an endowment of $28 billion dollars in 2020. The University of Texas system as a whole had an endowment of about $30 billion. So, while Texas does offer more affordable housing and lower taxes, it doesn’t have the engineering prowess that Silicon Valley or California has.
Seattle does have a chance, though. While housing is also relatively expensive, it does not have a state income tax. This could convince younger entrepreneurs to locate there as a result. Seattle also has a phenomenal engineering and computer science school at the University of Washington. This is one of the reasons why it has become a great city for artificial intelligence startups. It’s also already established itself as a tech-friendly city with Microsoft, Blue Origin, and Amazon.
Boston is another possibility. The median home cost in Boston is around $600,000 and over $1.3 million in San Francisco. Boston also has the world-class institutions of Harvard and MIT. It is already known as a robotics hub of the US with companies like Boston Dynamics, Bluefin, iRobot, Harvest Automation and many others. If it wants to become the next global tech hub, it certainly has the economics and education to do that.
What’s Next for Silicon Valley
If the valley wants to remain the epicenter for tech, it needs to make big changes fast. Costs of living are just too high to justify a six-figure salary at a big company. Especially if you can get that six-figure salary somewhere else in a much more affordable city.
