Wednesday, December 23, 2020

Techsodus/Techsit politics.

The tech industry is fed up and leaving San Francisco in particular, the valley and California in general. Covid, like a war, speeds things up. If you're a young economist you could do worse than study this latest chapter in the (likely) decline of great cities (SF, NY, LA? Chicago?) and the movement of people and industries to friendlier, safer, and more welcoming climates. If you're a young political economist, whether they bring with them the politics that destroyed the places they left behind -- slash and burn progressivism -- will be equally interesting to watch. 

I ran across a great essay on this saga by Mike Solana

The latest fashion is to claim it's immoral for tech founders and companies to leave, after they have "extracted" so much wealth here. Mike skewers this new fashion, pointing out that tech companies and their founders created wealth here.  Microcode is not mined like gold. 

I take extreme issue with the notion that industry leaders have taken something from the “community,” ...This is precisely the opposite of reality. ... They are the network. Technology workers do not “extract” value from the region, they are what makes the region valuable.

...the Bay Area’s nativist, anti-immigration political climate has certainly not created the tech community, which is populated largely by immigrants, be they from out of the state or out of the country 

But he really digs in on the culture and politics that is going to send this golden goose packing to Austin: 

 the technology industry has brought tremendous tax revenue to the Bay Area. The budget of San Francisco literally doubled this decade, from around six billion to over twelve billion dollars. With our government’s incredible, historic abundance of wealth, the Board of Supervisors has presided over: a dramatic increase in homelessness, drug abuse, crime — now including home invasion — and a crippling cost of living that can be directly ascribed to the local landed gentry’s obsession with blocking new construction. ...

"Landed gentry." That's really good.  

The San Francisco ruling class did secure a few wins this decade. They managed to ban vapes, scooters (effectively), electric bikes (kind of), and those little plastic swords that free men in free countries are still allowed to stick in cocktail fruit. They failed to ban busses and cafeterias, though somehow succeeded in turning both into symbols of billionaire greed. They also instituted the “San Francisco Office of Emerging Technology,” which in theory prohibits almost every future company and technology from existing in the city without prior approval from the local government. Laws aren’t enforced in San Francisco, so the OET hasn’t really come up. But a company in this city can now be attacked by the Board at any moment, for almost any reason. This is the nature of ambiguous laws in one-party states. In a country where nothing is technically legal, punishment can be meted out for almost any whim or unjust personal reason that can be imagined by small-minded people with political power.

Mike describes the higher tax - lower services - people leave spiral vividly

let’s take a closer look at this issue of money. On one hand we have insane, nativist property tax codes, which punish new homeowners at the expense of longtime landlords, and on the other our income taxes have skyrocketed. Since income taxes are structured progressively, the state has backed itself into a position of extreme uncertainty, as the top one percent of earners pay half the state’s taxes — while politicians argue the state’s wealthiest men and women, who already pay more in taxes than the wealthiest men and women of any other state and most free countries in the world, are not paying their “fair share.” As if rudimentary economic threats were not enough, politicians have made cultural platforms of their anti-technology, anti-industry attitudes, and have done everything in their power to drive our top one percent of earners out of the state. In this, our politicians are succeeding. [ Link to Elon Musk's departure]

Such success in driving top earners from the state only further exacerbates the state’s political disasters, with our government of bloated, corrupt services now starving for income. This has in turn increased the political appetite for all manner of draconian, anti-business practices ...everything is structured to further deteriorate.

A donation to the food bank? Not gonna fix this.

Fortunately, tech industry “extraction” is something other regions of the country are welcoming with open arms. 

Local activists bemoaning gentrification, you are about to get what you have always wanted, good and hard. If you haven't been following, the latest gems out of Sacramento are a 16% top state income tax and a 0.4% wealth tax. And perhaps a sign saying "don't slam the door on your way out." 

Mike's second point is  more novel. Why did an industry worth billions not take over the local government? We are used to stories of capture, not destruction, of host-disease coevolution in which the virus stays alive by learning to infect without killing. His political analysis:  

 had tech workers actually assumed a significant measure of political influence, and led in local politics, San Francisco would today be one of the greatest cities in the world. But not only was such political influence not achieved, it was never attempted....

... the Bay Area’s landed gentry class, which is in complete political control of the region and has been for decades, did almost everything in its power to block construction as demand to live in the region skyrocketed. This artificially ballooned real estate values — along with the cost of rent — to historic, national highs. While the technology industry generates tremendous sums of money for the region in tax revenue, the number of actual technology workers has always been relatively small. In San Francisco, we were never anything close to a voting majority, and of the minority of workers who lived in the city most were not politically active. From here, it was a tale as old as time: politicians in San Francisco scapegoated tech workers for the housing crisis the government created. The scapegoating, amplified by a thoughtless press, catalyzed anti-tech sentiment that increasingly influenced ballot propositions and local political races. Tech workers, ensconced in the world of their work, remained more or less oblivious of these developments. 

On the national scene, Big Tech has woken up fast to the fact that they are now regulated oligopolies and need swaths of lobbyists. Perhaps that's easier than keeping local politics under control. 

I do think the technology industry can and should be blamed for one thing: taking this bullshit for as long as it has. While the industry has caused none of the problems it’s accused of causing, absence of tech workers from local politics has been problematic, if understandable. The technology industry is ripe with opportunity, and attracts people excited by the prospect of building technologies and companies that have never before existed, unencumbered by bureaucracy, and limited only by the bounds of their imagination. No one moved to San Francisco because they wanted to run for the local Board of Supervisors. I get it. But if 2020 proved anything, it’s local politics is almost the only thing that matters in terms of our day-to-day existence, and if the deterioration of San Francisco can’t be stopped, I at least hope it will be remembered. We can ignore local politics, but local politics will nonetheless shape our lives, and a sufficiently unhinged City Hall can destroy almost anything. 

He has a good number of ideas, but they boil down to this: 

In any case, regardless of the city we land in, we have to get involved. There’s no ignoring the rest of the world anymore. Grab your shovels, folks, we’ve got work to do.  

Perhaps. But  I think he's a little too kind. To the extent tech is political it is cloyingly progressive. If you have a gazillion dollars, you really don't care about building codes that double the cost of a house, or zoning codes that means all the little people have to drive 50 miles each way, you just outbid everyone else. When tech does go in to politics it tends to do what every other industry does: support those in power and demand exemptions for yourself. Even the massively funded effort to overturn the idiotic AB5 (Uber drivers) just got an exemption for Uber and Lyft, it did not try to cure the root problem. 


  1. And, the Rose Bowl moved to DFW.

  2. "To the extent tech is political it is cloyingly progressive."

    They are partial to shareholders and no one else. If it suits them one day to go after progressives, they will turn around and shock everyone who was naive enough to think this wasn't about the money.

    " (...) [W]hether they [people who leave blue cities] bring with them the politics that destroyed the places they left behind -- slash and burn progressivism -- will be equally interesting to watch. "

    I suppose it depends on what drove them away. If progressive politics is what they flee, they sure as hell will not bring it with them. But if you're looking at "default Democrats" who do not realize the link between what their politicians proposed and what ended up costing them their place under the sun, they just might bring it with them.

    At least we know that Ben Shapiro, Elon Musk and Joe Rogan sure as hell aren't exporting 'slash and burn' progressive politics, but what happens with the wealthier segments of the populations can be a far cry with what happens with the rest. Time will tell, but it would be terrible if they didn't learn their lesson.

  3. And this is why federalism is a savior. People need not die, they need merely migrate.

    1. > People need not die, they need merely migrate.

      Atlas Shrugged. In the midst of Ike's Blandland, Rand saw deadly rot. As rock singer, Marianne Faithfull, so tartly warbled, "We've been trying to get high without having to pay." Trump and Biden are the payment. And we're not high. Bummer!

  4. They aren't fleeing progressive politics: only the results of progressive politics.

  5. Heavy sigh. I sadly agree with Bryan Caplan. These policies aren't passed by corrupted politicians but by popular demand and popular demand likes these policies. I guess everyone is born a socialist and requires special training to undo that natural state of mind.

  6. Also fun to see the Laffer Curve showing up after years of people, including most of the economics profession, claiming it was a myth. Do they just assume everyone has feet made of stone?

  7. Since the world is moving from hardware to software (3D printing, pocket supercomputers, electrification and automation of last mile delivery), Silicon Valley is sucking, like a black hole, all local business (e.g. Uber vs local mafia run cab companies -- not a bad thing at all; to SAAS where the biggest mapping company wants to do all software thru cloud instead of their extremely expensive and popular desktop, locally controlled versions; McDonald robots making food etc; Silicon Truck companies driving 1000s of truck with software jockeys controlling from afar; Google digital surgeries performing state of the art surgeries across the globe!). Maybe, local businesses will create new industries to survive the black hole of software replacing work, like globalizing their artisanal product when transport becomes superfast e.g. lunch in Falling Waters House in Bear Run PA, then dinner at Eiffel tower in Paris with a local Madonna lookalike performing your favorite song while you dine -- multiplied by billions of folks who will afford them. So yes, we should geo-diversify software production. It stales very quickly even if the weather is super nice!

    1. I think if you take a good look at "3D printing" and robotics, you will discover that the challenges are as much about the hardware as the software. Both fields, broad as they are, are ripe for new materials science and engineering, chemistries, and physics. Novel biomaterials are as critical to medical advances as any Google robotic surgery technologies. On "last mile delivery", I had a free weight set delivered to my door recently; I'm not holding my breath for when such packages arrive by drone or robot.

    2. Yes, as of now (but even for materials the 'software' is in top Univ labs etc.) ... Within just 2 decades (from 1900 to 1920) NY City moved completely away from horse carriages to cars. The price point for autonomous last mile delivery is coming faster than we think. 'hope it eliminates home refrigerators, storage cabinets and shopping lists!

  8. James Edward (Eduardo) CregoDecember 25, 2020 at 3:43 AM

    This is progressive politics gone extremely wrong in some many ways.

    (Cue The Mamas and The Papas, and Yes, Mama Cass is sing that sweet lullaby of a crescendo!) Cause California Dreamin' needs a rewrite called I Was California Dreaming. And trust me, "All the Gold. . ." ain't in California no more.

    I guess that's why the Raiders said Adios, Muchachos, y Bueno, hasta luego! to the golden state, and made a beeline for Viva Las Vegas!

    1. Your last point isn't correct. The Raiders left to Vegas because Oakland refused to pay for the new stadium and Vegas did. Hilariously the one time it seems the progressives realized that a stimulus sounding proposal was really crony capitalism in practice.

  9. Tax it, and you get less of it. Regulation == taxation. Migration away from California is simply a manifestation of this aphroism. Human capital, being highly mobile, and less fixed to any one physical locale, is first to move. Physical capital, less mobile, follows soon afterward. Emmigration represents the loss of perpetual taxation for the losing region. It should therefore come as no surprise that those most dependent on the local taxing authority should also be the most caustic towards those who are the most mobile and least vested in the taxing region. Those sentiments feed on themselves and promote more emmigration. Taxes lost must be made up for by further taxation, or services cut. Regulation becomes more, not less, onerous. As is often remarked, 'money goes where money is; if there is no money there, money doesn't go there.' Human capital is but one-half of the inputs to the tech sector; money, financial capital, is the other half. But money often chases human capital, and if a region makes it untenable for human capital to thrive, then capital will leave that region for another that does provide for the thriving of human capital. We see these tendencies reflected in Solana's article. Nice pick of topic, Doctor---Stimulus for the intellect, on Xmas day, while living in isolation of the now not unusual 'lock-down' orders. Cheers!

  10. "If you have a gazillion dollars, you really don't care about building codes that double the cost of a house"

    Oh, actually, I think you do -- no, not for your own house but for those of all your company's employees who have to paid much higher salaries to put up with the high cost of living.

    Now that the pandemic has forced tech companies to learn how to function with fully remote employees, CEOs are waking up to the reality that the company can save serious money by not requiring workers to live in the Bay Area. And moving the company's headquarters is not even needed to realize these benefits. With remote employees, the company doesn't have to pick a new location (one that might, soon enough, turn into another stationary bandit). Instead, the company can let its workers choose the environments they prefer while nowhere having the firm present a big, immobile target for state and local governments.

    There's an old idea that 'the internet interprets censorship as damage and routes around it'. There may be an emerging economic equivalent, something like 'the tech economy interprets stringent regulations and high taxes as damage and routes around them'.

    Anybody remember this:

  11. Might this exodus help Gavin Newsom "solve" the CA housing crisis?

  12. This the argument the Soviets made, that the nation had invested so much in its citizens that they couldn't leave unless like the Jews they bought their way out. The assumption of course is that the state owns its citizens.

  13. > The latest fashion is to claim it's immoral for tech founders and companies to leave, after they have "extracted" so much wealth here.

    The 1848 Commie Manifesto is not a latest fashion.

  14. If you look at San Francisco Bay Area as a hub specialising in innovation of a certain kind (and other localities doing their own specialisation) then we should be celebrating the fact that Elon Musk's innovation activities here have led to his business graduating to some other place which specialises in manufacturing matured products.
    For many decades being innovation hub ("Silicon Valley" the most glamorous incarnation) has been the dominant feature of this area. People come here from around the world to be at the global centre for their expertise. Startup efforts find a ready supply of specialists who can develop product in a short time and then move just down the street to the next need. But as the goose gets fatter it has increasing difficulty laying those golden eggs. The company I work at just lost a key employee because he could reduce his commute from over an hour to under six minutes. People move to the Bay Area for the combination of in-specialty innovation hub and pleasant lifestyle. People leave when the lifestyle sours. One-plus hour commutes are not sustainable for an innovation workforce. A five hour drive, in congested traffic, to weekend recreation is quite a turn-off. Mature companies must be eased out to prevent urban sprawl destroying the pleasant lifestyle that enables this particular sector of the economy. Limiting urban growth is not just a matter of incumbent selfishness. It is, more importantly, a matter of prudent economic stewardship.


Comments are welcome. Keep it short, polite, and on topic.

Thanks to a few abusers I am now moderating comments. I welcome thoughtful disagreement. I will block comments with insulting or abusive language. I'm also blocking totally inane comments. Try to make some sense. I am much more likely to allow critical comments if you have the honesty and courage to use your real name.