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About this blog: I am a native of Alameda County, grew up in Pleasanton and currently live in the house I grew up in that is more than 100 years old. I spent 39 years in the daily newspaper business and wrote a column for more than 25 years in add...  (More)

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Two reports raise concerns about economic future of Bay Area

Uploaded: Aug 26, 2021
Predicting what office life will be like and its impacts on pricey commercial real estate downtown has been a guessing game since the pandemic broke out last year and work-from-home became routine for many.
Now with the more contagious Delta variant of the Covid-19 virus infecting vaccinated and non-vaccinated people alike, many larger companies have postponed their reopening or are rethinking their plans.
This week two reports, coming from different perspectives, added some new information to the equation.
Wells Fargo Senior Economist Mark Vitner, in a call with clients, said he expected that the relocation from the Bay Area may well be permanent. He noted, in Mark Calvey’s report in the San Francisco Business Times newsletter, that initially people left for vacation destinations such as Truckee/Lake Tahoe, but that’s shifted into what he termed “a huge migration…an affordability migration.”
The second report from Hoover Institution fellows Lee Ohanian and Joseph Vranich documented just how many companies have left the Bay Area.
They reported that 74 companies relocated out-of-state in the first six months of 2021, double the rate in each of the three prior years. They identified 265 relocations since 2018.
Vitner told clients that with the Delta variant and worker concerns companies are taking a second look and rethinking whether they need headquarters in expensive cities such as San Francisco. He suggested that for young workers the city life will continue to be an attraction, but those married people raising families will see greener pastures elsewhere. He said that Brex and Coinbase are two companies once based in San Francisco who have shifted to a no-headquarters approach.
His list of destination cities for both individuals and companies are familiar names-- Denver, Salt Lake City, Nashville and Charlotte as well as Phoenix where housing prices have soared and Jacksonville, Fl.
The Hoover report noted that the moves are occurring across industries—manufacturing, aerospace, financial services, real estate, chemicals, health care and high tech. The tech exodus they write is very concerning because companies are very productive here and venture capitalists are eager to pour money into promising start-ups. The data for their report came from public documents and media reports and they note that the actual moving rate could be five times higher according to consultants in the relocation industry.
Vitner said the moves likely would be permanent because of the high real estate cost that works for departures, but is a roadblock to returning.

The Hoover fellows wrote, “Losing small but rapidly growing businesses is a death knell to an economy, because long-run economic growth requires new, transformative ideas that ultimately displace old ideas. And the transformative ideas almost invariably are born in young companies. At one time, Kodak and Litton Industries were Fortune 20 companies. Now they are afterthoughts. Out with the old, in with the new.
“Some of the small businesses of today will become the blockbusters of tomorrow, and California is losing far too many of these potential game changers. California is also losing the gifted creators of these businesses, creators who may start additional transformative businesses in their lifetimes. And if they do, these new businesses will not be launched in California.
“The primary reason why California businesses are leaving is economics, plain and simple. California is too expensive, too regulated, and too heavily taxed, both for companies and for the workers they hire. These businesses are predictably moving to states with lower costs, fewer regulations, lower taxes, and a higher quality of life for their workers, in which families pay far less for a home.”
They note Texas is the No. 1 choice having attracted 114 companies since 2018 that include Silicon Valley stalwarts such as Oracle and Hewlett Packard Enterprise as well as financial services giant Charles Schwab—all were founded here.
They write, “ Economic freedom? The American Legislative Exchange Council ranks Texas first, while California nudges out New Jersey to barely avoid the cellar. Ease of opening and operating a small business? California ranks 49th, again barely passing New Jersey, and is far behind the entrepreneurial states of Texas, Nevada, Indiana, and others. Taxes? California ranks 49th (meaning second highest) in overall tax burden as well as individual tax burden, while Texas is near the top. How do CEOs view California’s business environment? Annual surveys show they always rank California last and Texas first.”
Not a bright picture for the economic future of the once Golden State.

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Comments

 +   12 people like this
Posted by Lahommed, a resident of Dublin,
on Aug 26, 2021 at 9:39 am

Lahommed is a registered user.

In California with democrat representation all I can say is DUH.....we knew they would ruin this state. Vote Republican for once and make real changes for the better


 +   1 person likes this
Posted by Rich+Buckley, a resident of Livermore,
on Aug 26, 2021 at 10:11 am

Rich+Buckley is a registered user.

A friend of mine who I plagiarize frequently puts it this way. Are we regressing backwards or are we evolving forwards in some new fashion? A new model of human brain is being created to change 50/50 old model into the new 40/60 new model, with 60% going into right-brain intuition. This is important because even the living can get the re-tweak, not just new borns. The bet is, this will enhance human creativity.... immensely. The hope is, we stay put and create new solutions regionally. The wish is, we retain free will in the process. Rapid flushing out is usually followed by backwash flowing in until a new state is achieved.... according to my friend. What would happen if we made water and power more available in California using combinations of new tech? Los Alamos was reported to be building a Thorium reactor. I assume there is some progress being made that is publicly available although I haven't found it. Since there is more than one sort of Thorium reactor, the only posts I've seen was a brief YouTube video perhaps a year ago, of the construction site, surrounded by armed personnel, with intentional vagueness by Los Alamos as to the type and size of the reactor. The thing is, Small Modular Reactors (SMR's) built on the walkaway-safe Thorium Salt fuel, seems to be a good vehicle for use in California as well as the US Energy grid, plus enough energy to provide regional Desalination Plants to augment our water systems, to drive pumps 24/7/365, and to filter and purify local bodies of water. This type of Thorium reactor is scalable to our needs and we can do on 100 acres what industrial solar panel industry requires 100 Acres ^3 =1-million acres of solar panels. This Thorium Sale, SMR big science combination can be used in many ways, scaled up or down, for manufacturing, for agriculture, for water pumping and purification and on to an array of environmentally clean uses. And the fuel is recyclable. We just need positive leaders to step up.


 +  Like this comment
Posted by Rich+Buckley, a resident of Livermore,
on Aug 26, 2021 at 10:16 am

Rich+Buckley is a registered user.

Thorium Salt, typo corrected on Thorium Safe


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