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The Clash: The Power Divide Between the Working Class & the Managerial Elite

In this episode of the Feudal Future podcast, hosts Joel Kotkin and Marshall Toplansky talk with Michael Lind about how changes in economic control and the rise of social media affect national polarization.

Ask the Experts — Revitalizing California’s Business Climate

You are invited to join Chapman University’s Vice President of Research Thomas Piechota who will host the next Ask the Experts Town Hall on Friday, January 22, from 11 – 12:30 P.M. (PST). Read more

Virtual Town Hall — Revitalizing California’s Business Climate

Join Chapman University’s Vice President of Research Thomas Piechota as he hosts the next Ask the Experts Town Hall. The installment this month will be moderated by Dean Thomas Turk of the Argyros School of Business and Economics. It will cover how best can California’s business climate be revitalized to avoid the loss of companies, Read more

Can California stop Big Tech from decamping to cheaper places?

For the past half-century, California has dominated America’s tech industry. From the development of precision farming to the incubation of aircraft, space, semiconductors and computer systems, this state has emerged time and again at the cutting edge of future industries.

That is, perhaps, until now. In a stunning procession in December, California lost the leadership of three iconic firms — Hewlett Packard Enterprise, Oracle and Tesla — all to Texas, which this year even took the Rose Bowl’s place in hosting the college football playoff. In addition, many California tech firms, including Uber and Lyft, as well as Apple, have been shifting jobs outside the state.

This has been widely described as California’s “tech exodus.” Though it’s still less than a torrent and more a steady, long-term drip, it augurs some very bad trends. In recent years, California has been losing market share of innovative industries compared with 11 states with high concentrations of innovation-oriented firms, according to research by Ken Murphy, a professor at UC Irvine’s business school.

Since 2005, California’s share of the number of firms in the innovation sector (composed of 13 of the nation’s highest-tech, highest R&D advanced industries) has shrunk while competitors like Florida, Oregon, Arizona and Utah have expanded their share slightly.

The pandemic-induced push to move work online could hasten this shift. With 2 out of 3 tech workers willing to leave the Bay Area if they could work remotely, Big Tech could readily spread talent and wealth to other states.

Increasingly, California’s cities must compete with metro areas in Texas, Tennessee and even parts of the Midwest. Housing prices are a particularly critical concern: California has all three of the most unaffordable metro regions for first-time home buyers, according to a recent AEI survey, and six of the top 10. The flow of tech workers during the pandemic has gone to places like Phoenix, Dallas-Fort Worth and Raleigh, N.C., and away from big coastal cities with higher living costs.

Software-based tech companies can access knowledge workers outside California, and often at lower costs. At the same time, states like Texas and Arizona have been sought to replicate the California formula for tech industry growth — public university expansion, more suburban housing and public investment in downtowns, all meant to appeal to workers and their bosses.

California’s early emergence in both the aerospace and computer-related industries was strongly tied to physical proximity. The development of the aerospace sector, largely funded by the federal government, required close cooperation between designers and suppliers. This made the state, notably the Los Angeles area, unmatched as a center of aerospace development.

The semiconductor industry grew out of related companies like Fairchild Semiconductor, Intel, National Semiconductor and Advanced Micro Devices working together with customers like Hewlett Packard. That formed the basis for Silicon Valley’s remarkable growth and created lots of well-paying jobs for a generation.

But more recently, as the tech industry becomes more virtual and services-based, the companies’ workforces have less of a need to all be in one place. While these companies create vast wealth for a relatively small group of people, this is not a formula for broad-based economic prosperity.

Read the rest of this piece at Los Angeles Times.


Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Marshall Toplansky is a clinical assistant professor of management science at the Argyros School of Business and Economics at Chapman University. He is a research fellow at the university’s Hoag Center for Real Estate and Finance and at the Center for Demographics and Policy.

Photo credit: TahoeGuy via Flickr under CC 2.0 License.

Peak Progressive?

In the minds of most progressives, as well as some horrified conservatives, California is the harbinger of America’s future. Governor Gavin Newsom sees his state as a model, claiming California is “the envy of the world” and the great bastion of social justice. “Unlike the Washington plutocracy,” he boasts, “California isn’t satisfied serving a powerful few on one side of the velvet rope.” Read more

The End of Innovation: Exposing California

In this episode of the Feudal Future podcast, hosts Joel Kotkin and Marshall Toplansky talk with Tracy Hernandez about the end of innovation exposing California’s need to focus on job creation, electing public officials with job creating focus and ability.

Flight of the Icons: California Anti-Business Policies Driving Out Innovation Industries

Anti-business policies are driving flagship firms out of California.

It’s hard to say the word “innovation” and not think of California. Technology has paced the state’s growth in everything from agriculture and oil to housing, entertainment, and aerospace. California has always been the harbinger of the American future, the promise of ever-greater economic and social progress.

Yet increasingly, many of today’s innovators are fleeing the state. This past week, one half of the company arguably most symbolic of tech development in the state—Hewlett Packard Enterprises—one part of the now broken-up old Hewlett Packard and focused on lucrative areas like cloud computing and IT infrastructure—decided to leave for Houston. Within a week Elon Musk, the latest in the line of truly transformative California tech entrepreneurs, also announced that he would move to Texas, along with Oracle, a Fortune 100 company and global leader in database management. Other recent departures also include more traditional firms as Charles Schwab, McKesson, Bechtel, Parsons Engineering, and CB Richard Ellis.

The corporate exodus accompanies a human one. The state’s population, notes demographer Wendell Cox, is now virtually stagnant, with more people leaving and fewer people coming. Millennials, particularly as they ponder family formation (as we recently demonstrated in a report from Heartland Forward), are following a similar pattern. Today, suggests Cox, California, once the ultimate land of youth, is now aging far faster than the rest of nation.

Until the past year, Silicon Valley seemed immune to the economic stagnation or decline afflicting other key state industries such as aerospace, manufacturing, and energy. “We were fat and happy,” notes Jim Wunderman, president and CEO of the Bay Area Council, the region’s leading business group. “Now people are shaking their heads. HPE’s moving sends the message from one of the core founders of Silicon Valley. It’s very troubling.”

The appeal of Silicon Valley, as Wunderman is quick to add, has not disappeared: natural attractiveness and a congenial climate, leading universities, an unmatched pool of technical talent, and the preponderance of leading venture-capital funds. Even as the state suffers the nation’s highest poverty rate, the tech giants have ballooned in value, and new companies, including a set of IPOs, driven by the low cost of money and the pandemic disruption, are creating an enormous tax windfall—this year estimated at $26 billion.

California politicians, notably Governor Gavin Newsom, believe that this pattern is immutable, and that even as companies leave, new ones will take their place. Yet the process is slowing. In recent years, according to figures developed by UCI business school professor Ken Murphy, California has been losing market share among the 11 states with high concentrations of innovation-oriented firms. Since 2005, California’s share of the nation’s innovation business has dropped 3 percentage points, while competitors like Florida, Oregon, Arizona, and Utah have expanded their share. The Bay Area has also seen an exodus of corporate headquarters, often to Texas.

California’s innovation industries, which include science and engineering services, are no longer adding jobs faster than those of several other states, notably Florida, Utah, Arizona, and Washington. California’s innovation economy, to be sure, remains a powerful one, with 27 percent of all innovation businesses nationally, but in a world of corporate mobility, for how long will businesspeople be willing to absorb the higher costs of the Golden State?

California’s business flight has been gaining momentum for years. State housing policies, including climate-related regulation, and extraordinarily high development fees, have made it hard to build on the periphery of the major metros, where most population and job growth takes place. One result has been that the state’s new house-building permits have fallen to barely half that of key competitor states like Texas, Tennessee, Florida, and Arizona. California also accounts for all three of the worst metros for first-time buyers, according to a recent AEI survey, and six of the top ten.

High housing costs affect employees and are one reason why so many firms with many mid-income office workers—McKesson, Toyota, Bechtel, Jacobs, Parsons, Nissan, Bank of America—have departed for places where these workers can afford to buy a house. High energy prices affect both consumers and industrial companies. Regulation against such things as fossil fuels has driven Occidental Petroleum, one of the largest home-grown firms, out of the state, and threatens the future of Southern California Gas and other remaining fossil fuel companies, not to mention the livelihoods of tens of thousands of people in both the Central Valley and Southern California who work in the industry.

Read the rest of this piece at City Journal.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Marshall Toplansky is Clinical Assistant Professor of Management Science at the Argyros School of Business and Economics at Chapman University. He was formerly Managing Director of KPMG’s national center of excellence in data and analytics, and he is a co-founder of Wise Window, a pioneer in sentiment analysis and the use of big data for predictive models.

Photo credit: Rayhe via Wikipedia under CC 3.0 License.

Look to Orange County for How to Turn California Purple

For decades, Orange County was a reliable incubator of conservative politics, and, in the era of Nixon, Goldwater and Reagan, a fairly powerful force in the state and on the national level. More recently, the area has been widely seen as tilting blue, particularly during the Trump era, with the media celebrating the end of “the Orange Curtain” in the 2018 midterm elections and its metamorphosis into another addition to our state’s progressive political culture.

Yet this November’s election results tell us something more nuanced. Instead of following the flow of the state’s urban centers, Orange County turned a deep purple and, in the process, reinforced its relevance to the state’s political future.

The county defied the politics of polarization, voting for Biden against Trump, but also electing two new Republicans to Congress, Michelle Steel and Young Kim, both Korean Americans. House seats in the county are now split with five Democrats and two Republicans. And its voters supported generally conservative positions on a host of state ballot issues.

This shift is not merely an expression of pent-up white resentment. Orange County is no longer just a white enclave by the beach. It is more than half Latino and Asian, with a level of education that is considerably higher than Los Angeles’ and the state‘s. Yet despite being educated and diverse, Orange County moved back toward the center-right in this year’s elections, perhaps a harbinger of changes in other parts of California as well.

Orange County’s electorate is clearly no longer right-wing conservative, but is quite heterogeneous compared with the state’s solidly left-leaning urbanized areas. It voted for Biden by a decisive margin, 53% to 44%, strongly rejecting Trump’s awful nativism. At the same time, it showed little interest in embracing progressive agendas on economic regulation, taxation and affirmative action.

This was most evident in the ballot propositions. Orange County voters rejected by roughly 20 percentage points Proposition 15, which would have raised taxes on commercial properties and drew fears of increased costs to already beleaguered medium-sized and small businesses. County voters approved by even larger margins Proposition 22, which exempted app-based drivers from state employee laws. That measure lost only in the Bay Area and in a few rural counties. An attempt to expand rent control failed miserably statewide, and by nearly 2 to 1 in Orange County, winning only narrowly even in the blue bastion of San Francisco.

One factor behind these politically mixed and moderate results may be the relatively high percentage of homeowners, many of whom oppose higher taxes and greater regulation. Roughly 57% of Orange County residents own their own home, compared with 45% in Los Angeles County and barely 37% in San Francisco. Homeownership rates are also much higher in the Inland Empire, the outer suburbs of the Bay Area, the North Coast and most Central Valley areas.

These are places where California’s middle class can afford homes, or have the chance to start a business, regardless of whether the state’s planning priorities pushes development into ever denser communities in coastal areas.

Read the rest of this piece at Los Angeles Times.


Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Homepage photo credit: San Clemente, CA by D. Ramey Logan via Wikimedia under CC 3.0 License.

Governor Preen: Newsom’s Woke Posturing Masks California’s Dismal Economic Record

If Hollywood were to cast a governor and future president, and if a straight white male were still politically acceptable, he would look like California’s Gavin Newsom. The 53-year-old governor, a former mayor of San Francisco, Newsom handsomely epitomizes the preening politics of the California elite class that has nurtured and financed his career from the beginning. Read more

Politics, Polarization & The Plight Of The Middle & Working Classes With John Russo

In this episode of the Feudal Future podcast, hosts Joel Kotkin and Marshall Toplansky interview John Russo, co-author of Steel Town USA and a visiting scholar at Georgetown University. John has spent most of his academic career at Youngstown State University in Ohio, and he has spent much time cataloguing the plight of the middle class and working class in the US.