As tech companies move from blue states to blue cities inside red states, what are the long-term political consequences?
The Senate election in Georgia seems like it was years ago. Yet the trends that it foretells may be even more significant than the storming of the Capitol last week.
Recently, we’ve seen the movement of major companies — like Tesla, HP, Oracle, Dropbox, and Goldman Sachs — to blue cities in red states. These cities offer the amenities of blue culture coupled with a statewide environment of low taxes and less regulation.
The changing political makeup of Georgia is in part due to this larger political and business trend. Georgia, Arizona, Texas, North Carolina, and several other former solidly red states, are now turning, or at least trending, purple — and some even blue.
In this week’s WhoWhatWhy podcast, we discuss this corporate and political trend with venture capitalist and political strategist Bradley Tusk, whose companies have been on the front lines of this movement.
The electoral shift we saw in Georgia was more than just internal demographic changes and greater voter engagement. Each of these states has seen significant inbound migration from traditionally blue states like New York and California. Each of these red states has vibrant blue cities that have become growing tech and corporate hubs, attracting young educated workers and, in turn, new voters.
Tusk talks about Austin, TX, as the perfect example. It’s what he calls a fun, progressive city with great culture and a thriving academic and entrepreneurial community, existing in a state that prioritizes job creation over social and income equality.
But what happens politically as this trend continues to grow? Tusk speculates about this becoming a self-defeating proposition for many of these companies. Will these new college-educated workers, combined with changing demography, turn these red states completely blue? And will it then usher in statewide political changes that mirror all the things that the new tech migrants and their corporate leaders moved away from?
And what about California and New York, where these workers are leaving? Will this movement provide an opportunity for the more conservative voters in those states to suddenly have greater electoral influence?
Are we seeing the beginnings of the Great Migration 2.0?
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Full Text Transcript:
| Jeff Schechtman: | Welcome to the WhoWhatWhy Podcast. I’m your host, Jeff Schechtman. While our attention has been focused on Georgia, the state is simply part of a larger trend. Georgia, Arizona, Texas, North Carolina, all former solid red states, now turning at least purple and some blue. We make the mistake if we think this is only as a result of internal demographic change. The fact is that each of these states have seen inbound migration from blue states like New York and California and Connecticut. Each of these states have vibrant blue cities that have become new tech hubs, attracting young, educated workers and new voters. We’ve seen the continual movement of companies like Tesla and HP and Oracle and Goldman Sachs to blue cities in red states, cities that offer blue culture along with a statewide environment of low taxes and less regulation. |
| Jeff Schechtman: | But what happens as this trend continues to grow? Will this be a self-defeating proposition? Will these new college-educated workers combine with changing demography and make these red states completely blue? And will it then usher in all the things that these people moved away from? And what about states like California and New York, where these workers are leaving from? Will this movement provide an opportunity for the more conservative voices in those states to suddenly have greater electoral influence? Are we seeing in effect, a great migration 2.0? |
| Jeff Schechtman: | We’re going to talk about this today with my guest Bradley Tusk. He’s a venture capitalist, writer, philanthropist, political strategist, and host of his own podcast, Firewall. His work with startups has brought him in direct contact with many of these issues and it is my pleasure to welcome Bradley Tusk to the WhoWhatWhy Podcast. Bradley, thanks so much for joining us. |
| Bradley Tusk: | Yeah, thanks for having me, Jeff. |
| Jeff Schechtman: | Is there a reason why we are seeing this trend among companies, particularly tech companies now, companies like Tesla and HP, et cetera, moving? Does it have to do with the pandemic, the availability of remote work or is there something else making this happen right now? |
| Bradley Tusk: | I think the answer is yes to all. It’s a few things. One is, if you think back to say the 1950s, when manufacturers in the US started to realize, you know what? I can make the same thing in Mexico or in Taiwan for a 10th of the price and the quality is good enough. Once manufacturers kind of had that aha moment, there was never really any keeping it in large scale in the US. It happened over a period of decades and some cities handled it better than others, but fundamentally, once they realized, there was no turning back. And my fear is that COVID did the same thing to cities like New York and San Francisco, especially in that before COVID, there was just the assumption, okay, if I’m a really big tech company, I need to be in San Francisco or the Valley. If I’m a really big Wall Street bank, I have to be headquartered in Manhattan. |
| Bradley Tusk: | And then what I think all these companies realized is, you know what? I don’t have to be there. I don’t have to be anywhere. Zoom works pretty well. Productivity hasn’t really fallen and so I’m free to look at other factors to determine where I want to be. The first step was, COVID kind of creating that realization that led all of these tech companies and banks and others to realize that they didn’t have to be in specific places. And the next question becomes, okay, well then where do I want to be? I think there’s a particular group, and if you think about where all the companies that you listed moved to, it’s basically all Texas and Florida. There’s a particular group of locations that I think really benefit right now from where they sit, which is blue cities in red states. |
| Bradley Tusk: | Austin is kind of the perfect example. If you tell your San Francisco and Bay Area employees, ‘Hey, we’re moving to Austin,’ it sounds pretty good. It’s a fun city. The weather is usually really good. It’s considered to be a very progressive place. It doesn’t feel to your kind of millennial stakeholders, whether it’s your employees, your customers, media, that you’re in any way kind of abandoning the things that you care about. But what is it also? A city in a state that has no income tax and has very, very few regulations on business. If you’re Oracle or HP or Tesla or Dropbox or any of those companies, you’re going to make more money, you’re going to have less regulation to deal with, which makes operating easier and your employees because they don’t consider themselves moving to the heart of kind of red Ted Cruz country Texas, but to a city like Austin, they’re perfectly fine with it. |
| Bradley Tusk: | And so, there’s a bunch of cities, whether it’s Atlanta, Nashville, Austin, Miami, to a certain extent Phoenix and Salt Lake, that I think can enjoy this particular status of attracting tech companies in a way that looks totally fine optically, but also really means a significant tax saving. |
| Jeff Schechtman: | That works with respect to workers for those companies that are willing to move to those cities. What about in terms of the employees that those companies need in having a pool of talent that’s already there, the kind of pool of talent that exists in a place like the Bay Area or in New York? |
| Bradley Tusk: | Yeah. Look, I think it depends. I think that means that you couldn’t go absolutely anywhere. You probably couldn’t go to Tahiti, but one, as we’ve seen, when you and I were chatting before we started the interview, you asked if I was in LA, I said I’m in New York and we both realized there’s no difference. I could be anywhere during this interview. One is a lot of that talent now can really work from anywhere. And two, at least some of the places that I mentioned, like Austin, they have a highly educated workforce. They have a big university system there. They have an entrepreneurial scene. Is it as robust as the Bay Area, as the Valley? No, of course not. But is it enough? Yeah, clearly it is because keep in mind, it’s not just these bigger companies moving their entire headquarters from California to Texas; every other major tech company, whether it’s Apple or Google or Microsoft or Facebook, they have major operations down there too. |
| Jeff Schechtman: | Are we seeing some of these companies kind of playing games? I think you refer to it in your Fast Company article as kind of interstate arbitrage, the way Amazon did with HQ too, trying to play one state off against another in terms of what advantages they can garner. |
| Bradley Tusk: | Yeah, sometimes. I think there’s sort of two categories. Category one would be a company that just say, ‘Look, we’re tired of living in the West Coast or the East Coast and all of the challenges that it brings with it in terms of cost of living and quality of life and rising crime and other problems that we’re seeing kind of pop up again with some of the different cities. Therefore, we’d rather just be somewhere else.’ But then the second would be someone who said, ‘Look, there’s money to be made here by engaging in this kind of interstate arbitrage where we can pit cities and states against each other and see who will offer us the most.’ |
| Bradley Tusk: | I look at, we think about Tesla while they’re moving their headquarters from the Bay Area down to Austin. They engaged in that very much when they built their giga factory for all their battery stuff that Nevada, after a huge bidding war, ended up winning. Some of these companies have already been doing that. And so yeah, you’re going to see it, and I think especially as cities and states struggle with the budgetary impact of COVID and facing, many of them, billions of dollars in deficits, if not more. They can’t afford to lose any more tax revenue. And so, it’s easy to see them saying to themselves, ‘Well, I’ll throw these tax credits or incentives at these companies because it’s better than nothing.’ |
| Jeff Schechtman: | Is it more than taxes, is it about regulation? And if so, in what area specifically is it an advantage to some of these companies? |
| Bradley Tusk: | Yeah, so it’s definitely both and it depends on the regulation, but I think one that people in California are hyper-aware of these days is worker classification. You just endure $200 million-plus in ads asking me to vote for Prop 22, people never expected to hear so much and know so much about whether someone should be an independent contractor or a W2 that drives an Uber or delivers food for DoorDash or whatever it is. That’s not an issue in Texas. If you are one of these companies and you want to know for a fact that your employees or the people that you’re on your platform in those states will clearly be independent contractors that’s to your advantage. |
| Bradley Tusk: | Yeah, there are definitely some regulatory burdens that you see in states like me who are in California. You also do see the political zeitgeist in New York and California has moved very, very far to the left. Here in New York City, AOC is kind of our biggest star these days. And she is literally a democratic socialist. Given that movement has picked up so much steam on both coasts, I think there’s also some feeling of persecution among businesses, where they feel like they’re being unfairly targeted by the left, accused of things by the left, and they’re kind of saying whether it’s petulantly or not, ‘You know what? I don’t have to take this. Texas wants me, Florida wants me, I’ll just go there.’ |
| Jeff Schechtman: | Companies like to be where the money is and that’s your business, primarily the VC business, how is it impacting them? And our venture capitalists looking at these places and looking to move there as well? |
| Bradley Tusk: | Yeah, it’s funny. Some VCs that recently I know, I think it’s AGC, they moved from San Francisco to Austin recently. There does seem to be a trend of that. It may be because they want to be around some of their portfolio companies. Although, most VCs, we have investments in startups in the Bay Area, in Texas and Colorado and New York and Tel Aviv. We’re only going to be near some of them no matter where we’re located, but yeah, I think some of the same rationale, whether it’s lower taxes or less regulation or quality of life or cost of living have the same kind of appeal to VCs. |
| Bradley Tusk: | If you live in New York, I think California is equal to it, there’s an 8.85 percent state income tax that’s going to go up. And then also a 9 percent New York City tax. You’re basically paying 19 percent more than you would be if you made the same amount of money in other states. And so, there are a lot of people, VCs who may be saying, ‘Look, I invested in this company six years ago, it’s going to go public next year. I’m going to make all this money. I can literally save $7 million in taxes if I move.’ And those kinds of things motivate people. |
| Jeff Schechtman: | Talk a little bit about the way in which this has the potential to be self-defeating to the extent that some of these states start to go from red to purple, as a result of growth in these blue cities, and then ultimately perhaps turning into blue states that bring along some of the same problems that these companies and individuals moved away from. |
| Bradley Tusk: | Yeah, yeah, absolutely. And I think Georgia obviously is a really good example, where we saw on a federal level, Democrats captured both of those seats on Tuesday night. And I think most people would say Stacey Abrams wanted to run for governor again. She had an extremely good chance of winning that seat. What that means from a business standpoint is, that some of the same policies that motivate policy decisions in places like New York and California and Massachusetts and Oregon are all of a sudden then going to be more popular among lawmakers in places like Arizona or Georgia and North Carolina. |
| Bradley Tusk: | And usually what that means is people who Democrats typically believe, let’s have, we want to help more people. We want to expand the social safety net. We want to redistribute income so that life is more equitable and just. And I think there’s a lot of good to those philosophies, but it comes with, we therefore need more money and need more regulation. And then the more and more that those states start to resemble New York or California, then the inherent advantages they have right now in attracting jobs away from kind of typical blue states, will start to fade. |
| Jeff Schechtman: | Given that and given that possibility that’s out there, which is very seeable in so many respects. I think, the old saying, no matter where you go, there you are, is that an argument for some of these companies not to move? That it’s going to be the same, no matter where they go? |
| Bradley Tusk: | Maybe. It depends where you are. For example, if you were thinking Atlanta, yes. If you look at, Biden won Arizona, that’s federal and this is all state related, but they have had Democratic governors, like Napolitano, not particularly long ago. On the other hand, in Texas there’s a lot of talk in Democratic political circles about turning Texas purple or turning Texas blue, but it never really actually happens. It really just depends on how likely it is that you think that that state is going to flip from red to blue. |
| Jeff Schechtman: | Is it too late for places like New York and San Francisco in particular, to turn around, to begin to attract the kind of companies that are leaving today? |
| Bradley Tusk: | No, it’s not at all, but it does require a different focus than they’ve had so far. For example, you mentioned the Amazon HQ2 kind of arbitrage a little while ago. One of the two cities that Amazon picked was New York, in large part because New York had just so much talent that they wanted to tap into that, and they were driven out of town. And if you look at the people who led the fight against Amazon, the state senator from the area, the city councilor from that area, the state rep. from that area, they played the local politics exactly right. But the way they were playing it, their consideration was turnout in their primaries is typically about 10 percent and that’s what it was this past June when all of them ran for reelection; and New York is as gerrymandered as anywhere else, so there is no general election. The only election that really matters is the primary. |
| Bradley Tusk: | And that 10 percent who votes in a primary genuinely hates Amazon and genuinely hates business and wanted to see their state senator, their state rep. reject the deal. And they did it. And they were all reelected with 70-plus percent of the vote. The policy outputs that you would need to keep businesses here, here being in New York or San Francisco, would mean that you’re either ignoring the political input, which politicians typically don’t do because they desperately need to get reelected, or you’re changing the political inputs, which would mean significant increase in turnout. If you look at Amazon in Queens, both that district specifically and the city as a whole, overwhelmingly favored Amazon coming in all polling, but neither most people in that district or the city as a whole vote in those Democratic primaries. They could, they just choose not to. And as a result, if your only objective is to stay in office, that’s what you’re going to follow. |
| Bradley Tusk: | Could New York and California not keep increasing taxes on business? Sure. Could it not keep increasing regulation? Sure. Could they not keep politically demonizing business? Sure. It could do all of those things, but either the business world has to mobilize and really do a much better job being part of the local political scene and changing the political inputs that people have, or they have to expect people to go against their own interests and politicians don’t usually do that. |
| Jeff Schechtman: | A corollary of this is the work that you do every day, and I want you to talk a little bit about that, particularly with startups that are in disruptive businesses, where there’s often a lot of regulation that they’re running headlong into. |
| Bradley Tusk: | Yeah, sure. My background initially is not in tech, it’s in politics. I had run Mike Bloomberg’s campaign when he ran for mayor of New York and worked for him at City Hall. I was the deputy governor of Illinois for four years. I was in Washington as Chuck Schumer’s communications director. And I started a company in 2010. The consulting firm kind of runs campaigns for different companies. And early in my kind of tenure, I get a call from a friend saying, ‘Hey, there’s a guy with a small transportation startup, he’s having from regulatory problems, would you mind talking to them?’ And I become Bloomberg’s first political adviser that day, and then proceed to run campaigns all over the US for the next few years, legalizing ride sharing. And the thing that we figured out was that we could ask our customers to advocate for us politically. They did so with such force that it was enough to win that fight in every single jurisdiction in the country. |
| Bradley Tusk: | And then, did it again with CLEAR, which is the, you may know, they’re at the airports with your biometric screening and kind of help them navigate that. And then kind of finally realized that there was just nothing in the venture world that really sat at the intersection of tech and politics. And most venture capital firms try to avoid regulatory risk or really actively run away from it. And my thought was, what if you did the opposite? What if you actually embraced it and invested in startups in highly regulated industries, but then went about actually solved their political problems? Is that something that would create an opportunity? And so, we raised our first fund in 2016, took a really long time to get there because investors are always wary of new ideas, but were able to invest in some really great companies. |
| Bradley Tusk: | Invested in FanDuel and then ran all the campaigns to legalize Daily Fantasy Sports. And they had their acquisition announced a couple weeks ago, invested in Lemonade, and got them their insurance licenses in every state, including California. They went public last summer. We’re in Bird, we’re in Roman. Anyway, basically what it turns out is we’ve got this monopoly because we’re the only fund that does this. And the vast majority of startups are regulated by government in some way. We raised fund two in 2019, we’re two-thirds of the way done raising fund three. Right now, we’ve got this sort of interesting little niche within venture capital where we do the same thing other VCs do in terms of putting capital to companies, but then we then take it a step further and run political campaigns for them to be allowed to operate and exist. |
| Jeff Schechtman: | And in your view, where is the next area that we’re going to see the greatest disruption that has political consequences? |
| Bradley Tusk: | Yeah, it’s a great question. One that you’re seeing right now is telemedicine. We had actually made a bunch of investments in this space pre-COVID and almost started to worry, hey, are we doing too much in this space? Then COVID hits and all of a sudden, the value proposition of telemedicine changes dramatically because if you need care, either if you have COVID and you really can’t go anywhere or if you don’t have COVID, but you also don’t want to risk contracting it by going to the doctor or going to the hospital, digital care all of a sudden became a really good idea for people. And people who do things like mental health or go to therapy every week, started switching it from in person to phone or Zoom or whatever. And so, as a result, this all of a sudden became a much more popular and understood technology. |
| Bradley Tusk: | And now, states all over the country, as well as the federal government have to figure out, well, what should the rules be around this? How should prescriptions work? Can you just talk to someone over a text? Do you need to have a video chat? What types of services should have to be done in person? And so, it’s a really interesting question, but something that if pre-COVID probably didn’t seem like that big of a deal and now all of a sudden, it’s really important. To stick on a COVID theme, delivery drones. If you remember back to March or April, we didn’t really know how to virus was transmitted. Everyone was sort of leaving packages outside for three days or washing out everything from the grocery store with special soaps or whatever it was. We didn’t know. |
| Bradley Tusk: | But if you could’ve told me then, ‘Hey, you can get these packages and have no risk of potential human contamination because it’s delivered by a drone, not a person,’ I would have paid more for that. Just like if you said, ‘Hey, you can get in an Uber and the driver, it’s going to be self-driving so there’s no risk of contamination,’ I would’ve paid more for that. I think there’s a lot of things, ways that behavior changed over the course of the pandemic, that then make certain products a lot more appealing, which is going to then speed up their regulatory approval and then all the fights around it. Or if you think about, we were talking earlier about cities and states facing major budget deficits because of COVID. |
| Bradley Tusk: | Here in New York, if you look at the Mirror Post today, two articles on top of each other, one is Cuomo saying, ‘Let’s legalize mobile sports betting.’ And the one below it’s saying, ‘Let’s legalize marijuana.’ And in both cases, I don’t think Cuomo has a particular fondness for either of those two things but needs the revenue. A lot of startups that potentially could generate a lot of tax revenue that were having regulatory problems, now all of a sudden, they’re going to find themselves in a much better position, simply because the hundreds of millions of dollars or billions of dollars that they promised in new revenue a year ago didn’t seem all that necessary, that big of a deal, and today it does. |
| Jeff Schechtman: | Bringing it back to politics. You talked a little while ago about being at the fulcrum of technology and finance. Also, part of that is really being on the cusp of demographic and generational change as it affects politics and as it affects what the public will accept in terms of some of these startups. Talk about that. |
| Bradley Tusk: | Yeah, absolutely. I think the place for me, at least where it’s had the biggest manifestation, is in mobile voting. I mentioned earlier that when I was running those campaigns for Uber, the thing that we figured out was that we could mobilize our customers and turn them into political force. And I remember thinking at the time, man, if you could vote like this, it would be so much easier, you’d have so much more turnout. Politicians respond to whatever the political inputs are so turnout is only 10 precent. Only the furthest left or furthest right are voting in a particular primary, then that’s their incentive: it’s to listen to a very small group of voters. My thought has been, if you could radically increase turnout, especially in primaries, then you would push politicians towards the middle and towards consensus simply because that’s what it would then take to keep their jobs. |
| Bradley Tusk: | And the way to do that is to not make people go anywhere in person but allow them to vote on their phones. California has made some really good steps in terms of mail-in voting, but still, I check my mailbox once every two weeks, I check my phone once every two minutes or probably more than that. And so, if we really want to catch the people where they are, it’s online. And so out of my foundation [inaudible] philanthropies, we have now funded elections in 18 different jurisdictions around the US, where either deployed military or people with disabilities have been able to vote in recent elections over their phone. It’s either over the blockchain or the cloud, depending on the technology being used. Every one of those elections has been independently audited by the National Cybersecurity Center. They’ve all come back clean. Turnout on average has more than doubled. |
| Bradley Tusk: | It’s still very early stages and very new but to me in thinking about, why do decisions get made in politics? The answer is policy reflects politics. Policy outputs reflect political inputs and you got to change the inputs and the only way to really do that is to leverage technology. That’s what we’ve been doing. We’re running the effort. I’ve been lucky in that I’ve made enough money to fund this whole thing myself and I’ll continue to do that. To me, that’s the greatest manifestation, and a place where, also, not only going to be technological change, but social change. We’re doing things like talking about mobile voting on TikTok, on Instagram, and platforms where my 14-year-old and my 11-year-old are spending their time, because in their mind, of course you still have to vote on your phone; but at the same time, people who have things the way they like it right now are not going to want it to change. |
| Bradley Tusk: | All of those entities on the left and the right are not going to want to lose their power. They’re all going to object. They’re all going to say, ‘We can’t do this. It’s not safe.’ It’s incumbent on me to prove them wrong, but we’re going to really need more than just me showing people, hey, here’s how it works. We’re going to get younger people demanding change. And so, creating a movement to do that is really critical. If we can create the right technology and create the right movement, then I think we’ll see mobile voting pretty soon. |
| Jeff Schechtman: | And do you imagine seeing it in some of these states, to bring it around, some of these states we were talking about earlier, in places like Texas and North Carolina or Arizona, et cetera, that are really attracting a new generation of young, educated tech workers? |
| Bradley Tusk: | Yeah. Possibly. It’s interesting. In the states that we’ve done it so far, it’s really a mix. We’ve done it in states that seem pretty traditionally Republican like Utah and West Virginia and South Carolina, but then also states that are pretty traditionally Democrat, like Washington state and Oregon, and then also places that are in the middle like Colorado. It seems to have appeal to different people for different reasons. |
| Bradley Tusk: | In fact, one of the reasons that I think has been popular with Republicans, is then that we’ve made it available to deployed military; and it’s understandably very frustrating risking your life to protect our right to vote and then your ability to actually participate in the elections happening back in your home country are almost impossible because you’re mailing in a dollar from Kandahar and it shows up a month after the election is over and gets thrown in the trash. Of course, that you want to empower that demographic to have more say in the process. Yeah, I think that’s absolutely the case and it just kind of depends on individual politicians in different jurisdictions. But I do think that we’ll find support, maybe at least if some of those cities. |
| Jeff Schechtman: | Bradley Tusk, I thank you so much for spending time with us. |
| Bradley Tusk: | Yeah, thanks for having me. This was really fun. |
| Jeff Schechtman: | Thank you. |
Related front page panorama photo credit: Adapted by WhoWhatWhy from amy gizienski / Flickr (CC BY 2.0) and Bruce Fingerhood / Flickr (CC BY-NC 2.0).
