What If There’s No Next Big Thing?

California’s been good to me.
Hope it don’t fall into the sea.
Sometimes you got to trust yourself.
It ain’t like, anywhere else.
It ain’t like anywhere else.

It’s time to roll, I’m all done.
It’s time we better hit the road.
I got work, later on.
It’s time we better hit the road.

California  -  Tom Petty

…..

I co-wrote the following article with Jon Coupal, the longtime president of the Sacramento-based Howard Jarvis Taxpayer’s Association. Well within my lifetime, Howard Jarvis and Paul Gann in 1978 launched a rebellion against tax increases in California. That successful effort spread nationwide and still, believe it or not, keeps the golden state’s taxes lower than they otherwise would be.

This op-ed appeared in the Orange County Register on Sunday, January 29th. There were no song lyrics in the newspaper. I have added those because, well, I always have song lyrics.

Here’s the op-ed. Enjoy.

From its founding, California has been a special place, especially its ability to grow and foster new companies and industries that lead the world in their respective fields. Much of this has been driven by the spirit of entrepreneurship and innovation that found a unique home here.

Of course, the first “Big Thing” for California was the Gold Rush of 1849, attracting risk takers willing to cross two thousand miles of hostile territory with no guarantee of survival, let along success. Following closely behind the prospectors were the blacksmiths, shop keepers, farmers and cattlemen to serve the exploding population.

Once fully industrialized, California maintained its reputation as the place where innovation could fully flourish. But companies and industries have a predictable life cycle and are never static. They start small, and then grow exponentially. After which they mature and stabilize. The growth period, of course, is the most dynamic. That’s when the innovators themselves and ultimately their stockholders make substantial profits and employees grow in number and income.

For the last 60 years, California has always had an industry or two in that growth cycle. First it was the oil companies and the Hollywood studios. Aerospace came next. Then the first round of technology companies like Hewlett Packard, Intel and Cisco. As they matured around 20 years ago, along came the current wave of tech companies like Google and Apple to replace them.

In serial order, one new industry after another grew up in California just as the prior wave had crested and was settling into maturity. This trend has not just benefitted the economy and employment. These industries have powered the revenue to the state for decades. Because California’s revenue is so dependent on high-income earners, these rapidly growing companies have provided a lot of people who made very high incomes from stock, stock options and incentive-based employment. The recent budget surpluses have largely been driven by these enormous tech incomes.

But now, the current wave of tech companies is maturing. Layoffs at Facebook and Twitter and Salesforce are ongoing. The median income at Facebook is reportedly $394,000 which means lots of tax revenue for the state. Some political leaders suggest that we shouldn’t worry about the California economy and assume that there will be another big industry to grow up here to fill that hole in the budget.

But what if that doesn’t happen this time?

What if there is no next wave to replace the maturing Google and Apple? The promising industries of ride sharing and food delivery are struggling as is autonomous driving. Maybe something like ChatGPT is coming but there are no assurances there either.

While there will almost certainly be some “next big thing,” we can no longer be certain that that “thing” will be California-based. Despite high taxes, high cost of everything and onerous regulations, the educated and tech savvy workforce has kept many companies here. However, now those people can be hired remotely by a business in Arizona. Or, whereas once a Californian didn’t want to move out of state, now moving the family to Florida may not look so bad. That spirit of entrepreneurship and innovation that was such a part of California’s culture is eroding at the same time other places are finding their footing with creative growth.

The good news is that this future is avoidable. That culture of entrepreneurship still exists. Innovation and enterprise can still be found and grow here. It may be trite to say it, but it only needs a government that will get out of its way rather than suppress its dreams. Yes, it means less regulation and lower taxes. But it also means a government focused on those who produce instead of those who only take. Maybe more emphasis on the economic climate locally than the global climactic changes. Remember when we had the best schools and police forces in the country? We do. It wasn’t that long ago.

What made California special is still here. It just needs a government that gives it room to grow again.

And it needs it fast.