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Rick Perry and the Texas vs. California Tech War

A couple of weeks ago, I was waiting to do a CNBC slot on what to expect from the Apple Watch in Asia -- the entire smartwatch class is having a lot of issues for a variety of reason -- and I ran into Rick Perry, former governor of Texas, as he was coming out of the same studio I was about to enter. For some reason, I thought he was going to be a typical entitled stuck-up jerk, but he wasn't.

A couple of weeks ago, I was waiting to do a CNBC slot on what to expect from the Apple Watch in Asia — the entire smartwatch class is having a lot of issues for a variety of reason — and I ran into Rick Perry, former governor of Texas, as he was coming out of the same studio I was about to enter.

For some reason, I thought he was going to be a typical entitled stuck-up jerk, like a lot of folks in his position are, but he wasn’t. In fact, he was considerably friendlier and less stuck-up than I think I am (which led to a certain amount of uncomfortable self-examination).

We started chatting about technology and jobs, and how he’d been focused as governor on getting tech companies to move to Texas from California and hadn’t had as much luck as he’d hoped.

Jerry Brown, the governor of California, actually referred to Perry’s well-publicized US$24,000 media campaign criticizing California’s business climate as, and I quote, “a fart.”

Austin, Texas, has weather similar to California, more favorable tax treatment, lighter regulations — and it is where Dell, IBM, and AMD have a significant presence (among other firms). So why hasn’t Texas been more successful pulling companies over, even though California is at risk of losing Silicon Valley?

I’ll share some thoughts on that and close with my product of the week: the FLIR One infrared camera accessory for iPhones and Android phones, which may give you a superpower.

Critical Mass of Engineers

Folks don’t like to move long distances. Most people live within a close proximity to where they were born. Once they move, particularly if they have accumulated a lot of stuff, they don’t want to move again, ever. People also are far more willing to move when they are young than when they are older, which means once you get several generations of a particular skill in one place, migrating that skill someplace else will approach impossible.

It generally takes a combination of incentives and the existing environment becoming painful to live in to force any kind of large-scale migration from one location to another. You can see this with Detroit vs. California.

At one time, there were big GM and Ford plants in California, and the weather and living conditions have to be far better than in Detroit — and at one time, the costs weren’t that different. Still, the critical mass of car makers stayed in Detroit — and as costs went up in California, most of the plants there ended up closing.

Only Tesla is now big as a car manufacturer in California, having taken over an old GM/Toyota plant — but that is largely because the Tesla is more of a technology product than a typical car is, and the firm needs a critical mass of software and hardware engineers. So it built where that skill is, and those folks are in California.

Things Are Changing

As Perry pointed out, things have gotten really expensive in California, and it has become increasingly difficult to move people there as a result. Both middle management and entry-level workers find it really difficult to move to California.

Once you move away, typically you find it nearly impossible to move back, because the housing cost differences are so great. It isn’t just the cost of living either. Taxes are high, the roads and schools are in bad shape, and now the state is being hit by a massive drought with the only relief being the promise of an El Nino drought buster in 2016. If it doesn’t arrive, the state is pretty much screwed.

Add to that a massive increase in traffic in Silicon Valley. It has become so bad that it is almost impossible to get around between 6:30 and 10 in the morning, and from 2:30 to 8 p.m. — and it only takes a relatively small accident in one of the freeway intersections to turn much of this area into a parking lot any other time.

A few weeks back, there was a suicide attempt on a freeway bridge that turned San Jose and surrounding areas into no-drive zones.

Instead of building its huge new battery Gigafactory in California, Tesla decided to build it in Sparks, Nevada. (Perry regretted that, as he’d fought hard for that plant. However, given that lithium-ion batteries will be replaced in the next five to 10 years, and the plant will be hard to convert, he likely missed a bullet with that one.)

Also, people increasingly can live where they want and connect to their companies electronically. If you are in enough demand, you’ll likely find you have a choice of where to live — and California simply may not be it. However, right now, the alternatives aren’t really getting much traction, likely because there is no new event pulling people to one single location.

What It Would Take

It likely will take a sequence of big events to shift the technology center of the world from Silicon Valley to someplace else. Traffic, water, quality of life, and education are all elements already in play, setting a lower baseline for the next big industry to take off someplace else.

The robotics industry, including self-driving cars, is partially in the valley already — with firms like Google and Nvidia heavily invested. They aren’t at critical mass, though, which suggests that it could go vertical in a place that is better suited to manufacturing than research.

Artificial intelligence is also partially in the valley, but efforts like IBM’s Watson are largely outside of the state, providing another area of exposure. Silicon Valley never has been a huge hotbed of biomed, and a significant breakthrough in biomechanics or a silicon/organic hybrid actually is more likely to happen in another state or especially another country, where regulatory requirements are far lower.

If the seed sprouts someplace else, it likely will take several years to pick up on it, and then, if it were to result in a migration away from Silicon Valley, about five years for the trend to become irreversible. Based on the most aggressive model, we are looking at 2022 for that to occur.

Wrapping Up

In the end, it is likely far easier to attract a new industry rather than try to move an old one. It takes a massive amount of effort to move a company, let alone an industry, once a certain location reaches critical mass in skills.

Still, California’s problems, as showcased by Musk’s Gigafactory choice, likely are keeping the next Silicon Valley-like industry from being created there — suggesting that played right, Texas or a number of other states could become the home of the next big thing, with all of the tax revenues associated with it.

Given that California is having trouble just maintaining its infrastructure, finding a way to make the state competitive again should be a vastly higher priority than it currently is.

Elon Musk is trying aggressively to keep business and tech in California, starting with his Hyperloop train, which could turn California into a showcase and return the U.S. to world train leadership. However, he isn’t getting much help from the governor. Maybe Musk should run for governor of California?

California’s fall is close to my heart, because I was born and raised there, but I got fed up with the traffic and decided to sell my highly customized high-tech home and move to Bend, Oregon, for the clean air, clean water and low traffic. I’ll let you know how that goes. (I think I’m part of a mini-trend — we interviewed a home stager who had seven current clients, and six were moving to Bend.)

One final thought on Rick Perry: While we clearly don’t see eye-to-eye on a number of things, I actually liked the guy a lot, and he reminded me of some of the folks I most enjoyed working for. There are so many executives, celebrities and politicians who seem to think they are royalty. It is always a treat to meet one who seems better than that.

Rob Enderle's Product of the Week

I’m a big fan of Infrared cameras. I have several, and I’ve found them invaluable for finding broken pipes in walls, leaking weather stripping, and even finding problems with my project cars.

When the first FLIR One came out, I was intrigued — but it only fit on an iPhone 5, and I don’t want to carry an iPhone. This new FLIR One works on any current-generation iPhone, and later this month, it will be followed with a second version that will work on any current Android phone as well.



It costs $250, and it has two cameras — the second one is a regular camera — so you can see both the hot or cold spot and what that spot relates to and how (it overlays the pictures). Otherwise, you’d just see a red blur, and have to guess.

By the way, if you do have an old iPhone 5, the old FLIR One is on sale for around $150, and it works fine.

Because the FLIR One has become a critical tool — I also use it to find hotspots on home-built PCs — it kind of gives me a superpower: the ability to see through walls. Since it now works on a wider variety of phones, the New FLIR One is my product of the week.

Rob Enderle

Rob Enderle is a TechNewsWorld columnist and the principal analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends. You can connect with him on Google+.

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