A weird thing is happening in the business world where businesses are fleeing California and New York. I read this last week on Peak California. This is not Peak California from an opportunity or middle class paradise perspective. That is well in the past. The essay got me thinking about how in my line of business, we have been receiving notices of firms relocating their headquarters and operations centers. California is bleeding out.
The essay points to the current situation of potential tech centers to siphon off talent and venture capital money. It does not even hit on the need for firms that are not in high margin businesses to leave the state for all of the same reasons and sooner. The per employee costs are rising too high due to real estate as the ever increasing underclass makes the safe zones bid more. The state adds to this per employee cost by layering on more social programs. Not just the ones you know that they spend on every citizen and immigrant but the hidden costs of business. There is California state disability income, there is the paid family leave, and if you are in San Fran then you have to pay for San Fran’s paid parental leave.
Tack on all the taxes in the state, and there is little reason to have your business domiciled there with the rise of the Internet. Every firm can move their operations out of state while keeping some sales offices to serve the California market. An old timer once told me the dirty secret to Prop 13 was that by capping the costs of the land firms owned in California, it would mean that the thing they would have to try to control costs on to stay competitive was labor. California voters passing Prop 13 ended up encouraging firms to welcome illegal immigration. By trying to starve the government spending beast, they indirectly laid the foundation for the latin socialist republic they have now.
California has a lot of wealth to plunder and will keep on trucking but as the last golden goose (gold, then oil, then tech) gets choked to death, the state will face consistent problems. The last moment California could reasonably portray itself as cool was probably the graduation of the Saved By The Bell cast, but the myth of California lingers on. Onto the links…
Colleges Are Closing – Colleges are closing and others face financial problems. This will lead to centralization at the biggest drawing universities. New England is ground zero. This is a dark sign for the Blue State Model states that lean heavy on education for employment and revenue. An enterprising group with a mega-rich backer could start performing turnarounds on universities. I know the Chinese are buying some.
The USAF Secret New Drone – Read this thread on this new plane. This drone is a way to augment our F35 in combat and potentially fight the eventual sky darkening number of drones the Chinese will be able to produce.
Cold War 2 Heating Up – The US threatens to stop sharing intel with the UK unless they end Huawei use. This was followed up with the same threat to Germany. America is in this weak of a spot. The trade negotiations seem to involve us asking China to buy agricultural goods. America’s transition into a commodity powerhouse for China may be complete by 2025. Maybe we should have stopped those multinationals from using Gavekal platform firms and transferring all our tech. Ehhh, they had to hit that quarter’s EPS.
Germany Pretends To Deport Migrants – This report details the bureaucratic and legal mess behind deportations in Germany. The system does not want to do it. If you read these details, your blood pressure may rise. It is not as simple as handing them a plane ticket and sending them home, but it really should be. This proves it is a lie.
Among the Yellow Vests – What is going on in France? This long read is worth it. A part of me thinks they should have just kept escalating the violence in any way they could because they got caught in a protest-low level riot space and never made the leap. It lasted long enough that the system played defense and has been waiting them out. There is something incredibly depressing about the Macron figurehead brushing this off at his oligarch’s request.